Best of the Week
Most Popular
1.The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - Doug_Wakefieldth
2.Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - Nadeem_Walayat
3.The Trend Every Nation on Earth Is Pouring Money Into - Keith Fitz-Gerald
4.Do Tumbling Buybacks Signal Another Stock Market Crash? - 26Mike_Whitney
5.Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - Nadeem_Walayat
6.Gold And Silver Price - Respect The Trend But Prepare For A Reversal - Michael_Noonan
7.U.S. Economy Faltering Momentum, Debt and Asset Bubbles - Lacy Hunt
8.Bullish Silver Stealth Buying - Zeal_LLC
9.Euro, USD, Gold and Stocks According to Chartology - Rambus_Chartology
10.Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - EWI
Last 5 days
Gold And Silver – Elite Supernova Death Dance In PMs? - 1st Nov 14
Pretium - Canadian Golden Elephant - 31st Oct 14
What USA Today Got Wrong About the Stock Market Fear Gauge - 31st Oct 14
Election Result - Labour Wins South Yorkshire Police and Crime Commissioner - 31st Oct 14
Gold Price Falls, Stocks Record Highs as Japan Goes ‘Weimar’ - 31st Oct 14
EUR/USD - Double Bottom Or New Lows? - 31st Oct 14
More Downside Ahead for Gold and Silver - 31st Oct 14
QE Is Dead, Now You Tell Me What You Know - 31st Oct 14
Welcome to the World of Volatility - 31st Oct 14
Stocks Bear Market Crash Towards New All Time Highs as QE3 End Awaits QE4 Start - 31st Oct 14
US Mortgages, Risky Bisiness "Easy Money" - 30th Oct 14
Gold, Silver and Currency Wars - 30th Oct 14
How to Recognize a Stock Market “Bear Raid” on Wall Street - 30th Oct 14
U.S. Midterm Elections: Would a Republican Win Be Bullish for the Stock Market? - 30th Oct 14
Stock Market S&P Index MAP Wave Analysis Forecast - 30th Oct 14
Gold Price Declines Once Again As Expected - 30th Oct 14
Depression and the Economy of a Country - 30th Oct 14
Fed Ends QE? Greenspan Says Gold “Measurably” “Higher” In 5 Years - 30th Oct 14
Apocalypse Now Or Nirvana Next Week? - 30th Oct 14
Understanding Gold's Massive Impact on Fed Maneuvering - 30th Oct 14
Europe: Building a Banking Union - 30th Oct 14
The Colder War: How the Global Energy Trade Slipped From America's Grasp - 30th Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VIII) - 29th Oct 14
Flock of Black Swans Points to Imminent Stock Market Crash - 29th Oct 14
Bank of America's Mortgage Headaches - 29th Oct 14
Risk Management - Why I Run “Ultimate Trailing Stops” on All My Investments - 29th Oct 14
As the Eurozone Economy Stalls, China Cuts the Red Tape - 29th Oct 14
Stock Market Bubble Goes Pop - 29th Oct 14
Gold's Obituary - 29th Oct 14
A Medical Breakthrough Creating Stock Profits - 29th Oct 14
Greenspan: Gold Price Will Rise - 29th Oct 14
The Most Important Stock Market Chart on the Planet - 29th Oct 14
Mysterious Death od CEO Who Went Against the Petrodollar - 29th Oct 14
Hillary Clinton Could Be One of the Best U.S. Presidents Ever - 29th Oct 14
The Worst Advice Wall Street Ever Gave - 29th Oct 14
Bitcoin Price Narrow Range, Might Not Be for Long - 29th Oct 14
UKIP South Yorkshire PCC Election Win is Just Not Going to Happen - 29th Oct 14
Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear - 28th Oct 14
Principle, Rigor and Execution Matter in U.S. Foreign Policy - 28th Oct 14
This Little Piggy Bent The Market - 28th Oct 14
Global Housing Markets - Don’t Buy A Home, You’ll Get Burned! - 28th Oct 14
U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits - 28th Oct 14
Oliver Gross Says Peak Gold Is Here to Stay - 28th Oct 14
The Hedge Fund Rich List Infographic - 28th Oct 14
Does Gold Price Always Respond to Real Interest Rates? - 28th Oct 14
When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General - 28th Oct 14
Functional Economics - Getting Your House in Order - 28th Oct 14
Humanity Accelerating to What Exactly? - 27th Oct 14
A Scary Story for Emerging Markets - 27th Oct 14
Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - 27th Oct 14
Europe Redefines Bank Stress Tests - 27th Oct 14
Stock Market Intermediate Correction Underway - 27th Oct 14
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans - 26th Oct 14
Obamacare Is Not a Revolution, It Is Mere Evolution - 26th Oct 14
Do Tumbling Buybacks Signal Another Stock Market Crash? - 26th Oct 14
Has the FTSE Stock Market Index Put in a Major Top? - 26th Oct 14
Christmas In October – Desperate Measures - 26th Oct 14
Stock Market Primary IV Continues - 26th Oct 14
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Free Forex Forecasts

Why The IEA Wants High Priced Oil

Commodities / Crude Oil Feb 06, 2013 - 02:38 PM GMT

By: Andrew_McKillop

Commodities THE IEA' S NEWLY FASHIONABLE QUEST
Claiming his views "are not very fashionable", the Turkish-born chief economist of the IEA, Fatih Birol, also describes the IEA's annual flagship reports the World Energy Outlook as "designed and directed" by himself - and his WEO is obliged to reflect "unfashionable" theories and goals.

These new theories and goals are: universal energy supplies for all, and massive worldwide response to the crisis of global warming. Reconciling these two themes or memes needs high priced oil. Regarding the market price for oil, the IEA pitches for $175 per barrel; concerning new energy taxes in the form of carbon taxes "to fight global warming", taxes of $500 per tonne of CO2 on all fossil energy, possibly by 2020 or shortly after, are no problem for Fatih Birol.


This can be finely calculated as a per-barrel tax, using the official IEA conversion base of 0.70555 kilograms of CO2 per kiloWatthour of fossil fuel energy produced, and 430 kilograms of CO2 emitted per barrel of oil. At $500 per tonne CO2, this is the tax to be levied on every 2.325 barrels consumed.

Adding the market price to the carbon tax on every barrel, we could look back to the days of $100 per barrel as the good old days of really bargain basement priced oil!

STAYING FASHIONABLE

The IEA describes itself in each issue of the WEO as an "autonomous agency established in November 1974" with its primary mandate being two-fold: to promote oil supply security amongst its now-28 exclusively OECD member countries through "collective response to physical disruptions in oil supply"; and to provide "authoritative research and analysis on ways to ensure reliable, affordable and clean energy" for its member countries. 

Certainly the straight majority of IEA member countries today, including nearly all European countries, Japan, South Korea, Ausralia and others, have high priced energy, and extreme priced oil, at least in "old time economic thinking". In these countries the price of a car tank-full of fuel is close to $100. The petrol pump forecourt filling price is close to or above $350 per barrel. For Fatih Birol, however, this is cheap energy given the intensity and danger of runaway global warming.

Whether this fuel is "clean", or not, is contested by the World Health Organization's cancer research institute which most recently in June 2012 intensified its warnings on the causal link between diesel fuel and several types of cancer. It suggested a probable annual diesel cancer death toll in IEA member countries, mainly of working age persons, running as high as 150 000 - 200 000. Actuarial data on insurance coverage for Burial, Loss of Life and Annuities can give you the economic cost of this.

The theme of Diesel = Cancer of course figures nowhere in Fatih Birol's new look World Energy Outlooks  They have a much more urgent task: fighting the spectre of climate apocalypse "before the end of the century".

Times have certainly changed. Taking a quick flashback to November 1974, in the wake of the Arab oil embargo, we find the founding fathers of the IEA, Richard Nixon and Henry Kissinger, setting their future energy security agency as a second-best to what they really wanted to do. Invade and occupy Saudi Arabia to restore the free flow of cheap oil. Their IEA was a conflict-based entity created to confront Arab oil exporters intent on what Nixon and Kissinger said was their real agenda - ruining the economy of the richer nations by driving up the price of oil, or witholding supplies of oil, which is basically the same thing. 

Why Nixon and Kissinger, and everybody else in the big oil consumer countries saw red was simple: before the 1973-1974 Arab oil embargo, the barrel price was fixed at around $1.50 per barrel.

FASHIONABLE FOR ELITES

Fatih Birol's  WEO is nothing but "fashionable", for certain elites who now seek and want the highest possible price for oil, and in fact any kind of energy, after they add their tax take. To be sure the WEO is obliged to say the global energy map is changing because of the massive growth of US shale oil and gas production and may be further reshaped by a retreat from nuclear power in several OECD countries, the fast growth in the use of wind and solar technologies. and just as surely by the ongoing explosive rate of global shale gas and stranded gas discoveries, and linked LNG development.

But after that, the WEO claims it has proof that the world is still failing to put the global energy system "onto a more sustainable path". This concerns the elite-fashionable obsession with global warming (called climate change) and holding the growth of CO2 concentrations in the atmosphere to a limit of 450 ppm (parts per million). We can note that for more than 3 years, each annual edition of the WEO states that the IEA is convinced it is either impossible, or at best extremely unlikely we can limit the growth of CO2 in the atmosphere to 450 ppm by about 2045. If we wanted to do that, and tried, we would still not be able to do it.

Freshly re-elected Barack Obama, and vice president Biden have lost no time in saying they are personally convinced global warming from human CO2 emissions is real, and is a grave problem. More prosaically, the search by Obama and by lookalike - talkalike leaders, most recently France's Francois Hollande, for a quick way to raise tax revenues has refocused elite thinking towards the attractive ease of a levying new energy taxes "to save the climate".  In the US case, this would garner a hoped-for $100 billion in its first year of operation.

Despite oil's present extreme high price (in old time economic terms), which is completely unrelated to supply/demand fundamentals, oil will be a sure target for tax hikes.

The WEO talks its way through this challenge for spin doctors by firstly saying it wants  "affordable" energy for everybody, but its obsession with the 450 ppm CO2 limit means the IEA is obliged, "unfashionably" of course, to militate for high energy taxes whenever and wherever they can have the adjective "carbon" attached.

 For the IEA, "the 450 ppm limit" equates to a 2 degrees C rise in temperatures above the 1800-1960 average by 2045, although it feels free to change the goalposts and reference dates for world average temperatures, whenever it wants. This quest as "vital and obligatory", allowing rather little room for discussion on whether or not global warming is real!

Showing his deeply intellectual concern for global climate stability, Fatih Birol's WEO drips with fashionable pessimism on whether the "fight against global warming" will be won. Iin the most recent 2012 edition, the WEO presents its "450 Scenario", shorthand for preventing CO2 levels exceeding 450 ppm by or before 2045. It finds that "nearly four-fifths of the CO2 emissions allowable by 2035 are already locked-in by existing power plants, factories, buildings, etc".

This motivates its claim that much more intense, possibly harsh, rapid, and "unfashionable" action to reduce CO2 emissions must be taken before 2017, the date at which the IEA forecasts that "all allowable CO2 emissions" would be locked-in by existing energy infrastructures and systems.

High energy taxes (called "carbon taxes") are an inevitable and obligatory part of the IEA wishlist.

IS GLOBAL WARMING REAL?

The IEA keywords are "allowable emissions". Its voluntarily alarmist line on CO2 emissions is certainly fashionable to the IPCC and FCCC, the present "UN-related" but not UN-status climate change entities, whose current low-profile will surely change, if and when the global warming fear campaign is relaunched by OECD leaders and instantly given wall-to-wall media cover. Both the "UN-related" climate change entities are currently locked into dispute with the UN concerning their diplomatic and legal status: if they do not obtain full, ironclad UN status, both can be legally pursued for lying, which helps explain their present low profile.

The keywords "allowable emissions" are used everywhere in IEA publications. This concept of "allowable" emissions on a global basis is directly obtained from IPCC reports, studies and advocacy over the years since the IPCC was founded in 1988. These greenhouse gas emissions limits, we can note, do not include global emissions of CO2 and CH4 (methane) from gas flaring, venting and leakage from oil and gas production, gas pipeline and LNG transport; they do not include global coalmine CH4 emissions (roughly estimated at several billion tons CO2 equivalent, per year); they do not count agricultural CO2 and GHG emissions; they also depreciate or ignore human-related CO2 release from peat bog and wetland drainage, and from methane hydrate evaporation and leakage, the combined total amounts of which are probably very large.

 The IPCC in particular makes a point of massively underestimating natural non-human emissions of CO2, and to a lesser extent natural emissions of CH4, and a long list of the other GHG, especially sulphur oxides. The margin of error in estimating terrestrial, oceanic, atmospheric, biospheric and lithospheric carbon inventories most surely exceeds tens of trillions of tons, not billions of tons, the equivalent of centuries, possibly 700 years of human emissions at the current rate of around 30 bn tons per year.

 The IPCC brushes aside any and all talk of anthropogenic climate change - as distinct from anthropogenic global warming - due to deforestation, agriculture, urbanization and other land use mega changes. The IPCC also has no time for climate change due to Earth orbital variations, solar intensity variation, cosmic radiation and other "unfashionable" causes of climate change.

The only common denominator of these "unfriendly and unwanted candidates", for the elites, is they do not have easily identified, easily measured - and easily taxed - upstream energy sector linkage.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2013 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

Andrew McKillop Archive

© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014