Last year we predicted oil prices would reach $50 a barrel. Now $50 is the new floor for prices, rather than the ceiling. This year, forecasts of $100 a barrel oil are threatening meltdown for Western economies. At the projected $100 level for oil, living off-grid moves from a quaint hobby for a minority to something the majority must consider.
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Consumers Must Plan Now for Potential Oil Shock – IEA FRANCE: April 29, 2005
PARIS – Car-pools and driving restrictions could help shave at least a million barrels a day (bpd) from industrialised nations’ oil demand in the event of a supply crisis, the International Energy Agency said on Thursday.
They are among measures an IEA study ‘Saving Oil in a Hurry’ says consuming nations must plan to ease potential shortages and price rises which could result from a large disruption to international supplies.
Oil prices have already risen to record highs above $58 this year as surging demand in Asia’s emerging economies pushes world supplies close to current capacity. Goldman Sachs bank has warned of a potential ‘super-spike’ to $100 a barrel.
“We find that there are a number of different measures available that, at relatively low implementation cost, could together save upwards of a million barrels per day of oil, if implemented aggressively across all IEA countries,” said IEA Executive Director Claude Mandil.
Tighter motorway speed limits, special lanes for shared cars, free or cheaper public transport, a more compressed working week, and more telecommuting to reduce travel to and from work were among other measures suggested in the study.
Energy ministers from the 26 industrialised nations the IEA advises on energy policy will discuss the proposed demand measures at a two day meeting in Paris next week.
“Along with supply-side measures (such as use of strategic oil stocks) this may help countries cope with supply disruptions and avoid physical shortages and associated price spikes,” Mandil said.
Political tensions in big Middle East producers such as Iraq, Iran and Saudi Arabia have undermined confidence in security of supply from the region, which pumps a third of the world’s 84 million barrels daily oil needs.
Civil unrest in Africa’s biggest producer Nigeria has been another flashpoint, while oil production in Venezuela, a big supplier to the United States, is still suffering the fallout of a general strike two years ago that slashed capacity.
The IEA, set up in the wake of the 1970s oil shocks, already requires member states to keep emergency stocks that can be released if at least seven percent of IEA members’ oil needs — currently equivalent to 3.5 million bpd — is disrupted.
As well as a stock drawdown, which could release as much as 12.9 million bpd onto international markets, member countries can also decide to enforce measures that cut demand by 7-10 percent.
The proposed demand measures could suit either large-scale supply disruptions and for smaller or more localised supply disruptions in individual countries, the report said.
“A reduction in IEA transport fuel demand of even a few percent could have a substantial dampening effect on surging world oil prices,” the report said.
The IEA report said rationing schemes to prevent panic fuel hoarding in a supply crunch are unpopular, expensive and difficult to maintain.
“Governments should generally try to move quickly to approaches that are likely to be less costly to society,” it said.
“The key is to provide viable alternatives to very inefficient single-occupant vehicle driving.”
The most cost-effective policies, with implementation costs less than $50 per barrel saved include information programmes to promote telecommuting and flexible work schedules, ‘ecodriving’, car-pooling, odd/even day driving bans, and in some cases, speed reduction policies, the report said.
Policies that are not cost-effective include reducing public transit fares, increasing public transit service frequency, constructing car-pool lanes and purchasing home computers for half of all telecommuters.
The IEA urged governments not to interfere with market forces. “Higher oil prices give consumers an important signal to conserve fuel. Governments should not take actions that dampen this market signal,” the report said.
Story by Marguerita Choy
REUTERS NEWS SERVICE