Energy in a crisis

OECD Observer

©Arnd Wegmann/Reuters

The International Energy Agency (IEA) is 35 years old in 2009. A sister organisation of the OECD, it offers a timely reminder that a co-ordinated public response to a crisis can succeed.

In 1973-1974, when an oil embargo hit the industrialised world, the energyconsuming economies of the OECD realised that, unlike the OPEC countries, they had no forum from which to implement a swift and co-ordinated response. It was the US secretary of state, Henry Kissinger, who took the initiative in late 1973 to propose the creation of such a forum through the OECD, which already included the major oil-consuming countries. From that proposal, the International Energy Agency was born.

Today, 35 years later, the original aim remains as relevant as it was then: to promote the energy security of its 16 founding member countries by ensuring access to secure, reliable and ample supplies of oil in times of crisis. The agreement resulted in the creation of an oil emergency-response capability, which has remained integral to the role of the agency, even as IEA membership has grown to 28 countries with activities that span the globe (see footnote).

However, since I have taken up my duties at the head of the IEA, I have been repeatedly impressed by the extent to which this goal, while still fundamental to the core mission of the agency, has broadened and deepened in the intervening years. These new developments point the way to the future role of the IEA as an international reference for a wide range of energyrelated issues.

Founded in November 1974 as an autonomous agency within the OECD framework, the IEA was immediately operational. The International Energy Program (IEP), agreed among the participating members, created the substantive backbone of co-operation: a legally binding agreement to establish and maintain strategic stocks of oil that could be used to relieve pressures on individual member countries or otherwise released to stabilise markets in times of supply disruption.

The mechanism has stood up to some stern tests, with the IEA helping to steady oil supplies and markets by the coordinated actions of its members during various international crises since that time. The emergency-response capability was recently activated in 2005, when hurricanes damaged production facilities in the Gulf of Mexico, and member countries, based on the assessment of the IEA, made emergency reserves available to the market, effectively offsetting a major supply disruption. When hurricanes hit the same region in 2008, resulting in an even greater supply disruption than in 2005, IEA expert analysis showed that slower demand and higher stocks would offset the loss so that no intervention was needed. Again, the IEA's readiness to act helped to calm the market.

Secure energy

Still, since 1974, energy markets have changed and the concept of energy security has evolved-secure, reliable and affordable energy supplies are still as essential as ever, but they are not limited to oil. IEA members have come to appreciate the increasingly important role of other energy resources in the global total: natural gas, coal, electricity, nuclear and renewables. In addition, energy efficiency in the use of existing resources is an important and growing part of overall energy policy development. Assuring energy security entails a fundamental integration of policy and practice with environmental protection, to produce sustainable economic growth over the longer term and mitigate climate change. These considerations have produced what we call the "three E's" of balanced energy policymaking which the IEA is focused on today: energy security, economic development and environmental protection.

The IEA has earned a worldwide reputation for the excellence, timeliness and reach of its statistics and analysis. But more than that, the agency acts as an energy policy adviser to member countries and beyond, and indeed, we have become a primary reference in energy-related matters for governments and organisations. We also work cooperatively with a number of other international organisations and forums, such as the G8, in whose summits we were first invited to participate in 2005 at Gleneagles. Our current work to produce alternative scenarios for a "clean, clever, competitive energy future" as a part of the on-going G8 Plan of Action on Climate Change, Clean Energy and Sustainable Development was commissioned by that meeting. Most recently we submitted 25 consolidated energy-efficiency recommendations to the G8 summit in Hokkaido last year and will present further analysis to the upcoming summit in Italy in July.

Some of today's largest energy consumers are of course not members of the agency, a fact that directly influences how we work. Our own projections show that non-OECD countries collectively will account for 87% of the increase in primary energy demand between 2006-2030, with China and India alone claiming over 50% of this growth.

 

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We are more closely engaged with countries outside the IEA, particularly with China, India and Russia, through a Partners in Dialogue initiative. In fact, each of these three countries has been invited to participate in the next IEA ministerial-level meeting of our Governing Board in October 2009 and we are looking forward to working more closely with them in the future.

In addition, our experts are increasingly involved in a large number of training programmes and seminars with partner countries. We are looking to enlarge and extend these training activities, which not only sharpen policymaking tools, but help to harmonise practices and procedures worldwide, and to improve the timeliness and transparency of information available to energy analysts.

The IEA works with producer countries, too, in a combined effort to strengthen the quality and availability of data on energy resources. An example of success in this area is the Joint Oil Data Initiative (JODI), begun in 2001 as an exercise by the IEA and OPEC together with APEC, Eurostat, the Latin American Energy Organization (OLADE) and the UN Statistics Division (UNSD).

As we move forward into the next 35 years, the IEA will continue to provide the comprehensive, timely and reliable energy data and statistics needed to better understand the functioning of global energy markets. It will also maintain its effective emergency-response system, coordinating with countries beyond its membership and perhaps responding to energy shortfalls other than oil. And its work will continue to evolve.

The annual production of our flagship publications and data will continue to enhance our reputation and usefulness to energy professionals and policymakers around the world (see references). At the ministerial meeting in October we will release the first IEA Energy Scoreboard, a ground-breaking publication that will track 35 key energy trends over 35 years in individual countries, helping to promote wider public understanding of the energy challenges our planet faces. Our interactions with non-OECD countries will continue to expand as their role in the world economy and its energy grows. And we will promote adequate energy-sector investment to insure that energy security and the sustainable economic development to which it is tied can be assured for future generations in every country.

Countries and their governments worldwide want a safe, secure and sustainable energy future for their peoples. The IEA will continue to play a key role in helping them attain this goal.

Note: The founding member countries of the IEA were: Austria, Belgium, Canada, Denmark, Germany, Ireland, Italy, Japan, Luxembourg, The Netherlands, Spain, Sweden, Switzerland, Turkey, the UK and the US. Greece and New Zealand joined in 1977, Australia in 1979, Portugal in 1981, Finland and France in 1992, Hungary in 1997, the Czech Republic in 2001, Korea in 2002, the Slovak Republic in 2007 and Poland in 2008. Norway has participated under a special Agreement since 1974.

Some leading IEA references

OECD (2008), World Energy Outlook 2008, ISBN 978-92-64-04560-6, available at www.oecd.org/bookshop

OECD (2008), Energy Technology Perspectives 2008: Scenarios and Strategies to 2050, ISBN 978-92-64-04142-4, available at www.oecd.org/bookshop

IEA Oil Market Report (monthly by subscription)

Visit www.iea.org

See also www.oecdobserver.org for articles by IEA experts




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