Yesterday the IEA announced it was releasing 60m barrels of oil from its 'emergency' reserves, at a rate of 2m barrels per day. The interesting question is: what is the emergency? OK, Libyan oil is not flowing, but that's been the case for months now. Japan is using extra LNG, though it's not clear if oil use there is higher than before the tsunami, but once again, this is not a recent change.
The only reason that can be seen for releasing this 'emergency' oil is that high prices are choking off the economic recovery in developed countries. But if the high prices are due to restricted supply, then this is just the market doing its work - 'rationing by price'. If we don't like it, we should try physical rationing or other ways to get people to use less oil. If the market is signalling a shortage through rising prices, then doesn't trying to reduce those prices without fixing the underlying problem (excessive oil consumption) just push the problem a month or two further down the road?
Worse still, if we're using 'emergency' reserves when there isn't really an emergency, and if this starts happening more often, what will happen when these reserves are gone?
Of course there's always more going on behind the scenes than we know about in public. Take this news story from last week as an example:
The government was warned by its own civil servants two years ago that there could be "significant negative economic consequences" to the UK posed by near-term "peak oil" energy shortages.Basically, some smart, forward-thinking civil servants in DECC were researching peak oil and its impact on the UK in 2007, and in June 2009 a report was prepared, but ministers ignored it. This has only become public now because of Freedom of Information requests... You can download the slides here, but they are pretty in depth (which is good to see). Slide 16 is interesting, as most of the impacts which were researched in 2007 have now happened to one degree or another. So, coming back to the IEA oil release, maybe it ties in well with this stuff from DECC - they are perhaps trying to mitigate some of the immediate impacts of peak oil. Unfortunately this can't go on for much longer, as our emergency reserves are just as finite as the oil under the ground...
Ministers were told it was impossible to know exactly when production might fail to meet supply but when it did there could be global consequences, including "civil unrest".
Yet ministers consistently played down the threat with the contemporaneous Wicks review into energy security effectively dismissing peak oil as alarmist and irrelevant.