Editorial Comment

Two independent studies support what industry has been "preaching"

July 1999 Vol. 220 No. 7
Editorial

Thomas R. Wright, Jr.,
Editorial Director

Told you so

For the past few months, we have reported the observation that there was something not quite right with the world petroleum supply and demand statistics published by the International Energy Agency (IEA). However, two of the most persuasive authorities^1,2 pointing out these discrepancies are closely affiliated with the E&P sector, which provides skeptics with a conflict-of-interest argument.

However, now comes a report from an impartial source, which confirms many of the suspicions raised by our industry friends. It seems that the GAO,³ at the request of Senator Pete Domenici (R-N.M.), looked into the methods used by IEA to prepare its reports. While GAO didn’t say IEA had erred intentionally or that it had some hidden motive for skewing statistics, it did point out a few areas in which IEA had no hard data for making its projections.

For example, GAO states, "supply projections are based on IEA’s analysis of (only) 400 individual oil fields and areas in the 77 oil-producing countries. Members of OPEC are not included... In its analyses, IEA’s projected world oil demand exceeds the projected supply from the 77 non-OPEC countries. IEA assumes that OPEC supply and stock change will make-up the difference." GAO further concludes that, "at any point in time, the historical oil supply and demand, as well as stock data, reported by IEA could be overstated or understated by an unknown magnitude." (These are the infamous missing barrels.)

Commenting on the release of the GAO report, George Yates, chairman of the Independent Petroleum Association of America (IPAA), said, "users of IEA data need to be more cautious about the information." In particular, he cited the commodity exchanges, which need to better understand the limits of the IEA data, especially when oil markets are as turbulent as they were in early 1998. Yates also suggested that IEA and other agencies "improve data reporting, resolve anomalies and develop more reliable instruments."

From our perspective, comments from GAO and Yates seemed overly polite. Considering the importance accorded IEA figures in the world oil markets, something more direct seems appropriate, such as: "IEA’s half-baked analyses and outright guesses are causing unnecessary disruptions in the commodity markets. They should either get the numbers right or get out of the reporting business."

Another myth. Coincidentally, the NRC⁴ recently finished a report for the Environmental Protection Agency (EPA), which shows that adding oxygen to reformulated gasoline does more harm than good to air quality. Now, this controversy really got contentious in the early 1990s, not only from the standpoint of whether there was any scientific basis for requiring oxygenates, but also over which additive to use — ethanol or methyl tertiary butyl ether (MTBE).

While MTBE was the obvious choice on an economic basis, use of ethanol was mandated as a favor to the farm lobby and a few huge agri-business companies. To compound the mistake, Congress even subsidized ethanol use. Now, NRC says that ethanol gasoline blends cause more emissions from evaporation than MTBE and thus, more possible ozone pollution.

Despite our feeling of vindication, there’s the question of what to do with all that ethanol and MTBE production capacity if the oxygen mandate for gasoline is rescinded. The losses for farmers and MTBE producers will surely run in the billions of dollars. We’ll bet Congress figures out something for the farmers...

What G.W. really means. Texas Governor George W. Bush appears to be taking after his father when it comes to withholding comment on important issues until he can get a reading from the opinion polls. And if he keeps up the practice, he could become saddled with a new moniker. We’re not offering any ideas, but remember when his dad was called President Windsock for modifying his position every time public opinion changed?

Dubya, the governor and presidential candidate, says he has changed his mind about the global warming issue and, as reported in the Fort Worth Star-Telegram, said, "I believe there is global warming." But just a few weeks before this proclamation, Dubya had said that the "science is still out" on global warming.

During the news conference in which Dubya announced his changed opinion, he said, "The last time, I wasn’t certain of the science. I’ve had some briefings recently and I’m becoming more convinced that the science proves there’s global warming."

At about the same time this news hit our desk, a letter also arrived, announcing the formation of a Presidential Exploratory Committee, "encouraging contributions to help convince" Governor Bush to run for president. Considering Dubya’s new beliefs cited above, it was ironic that the letter was from a virtual Who’s Who of the oil field services industry — an industry that could be decimated completely if this GW drivel makes it into law.

We agree that Dubya would probably make a good presidential candidate. But if we sent a check, there’d be a string attached to it. The other end would be firmly tied to some of the hard data and real science refuting the GW theory.

Cost of war. The newsletter Access To Energy published in Cave Junction, Oregon, recently cited some statistics that further question President Clinton’s bombing of Yugoslavia. Current estimates put the cost of bombing at $10 billion and the cost for rebuilding after it’s over at $100 billion. If the U.S. and NATO had simply paid this in cash to the 800,000 refugees, each family of five would have received $680,000!

Simmons, M. R., "Crude oil prices: A year of infamy," World Oil, Feb. 1999, p. 28.

Littell, G. S., "World crude production: Bad statistics produce poor conclusions," World Oil, June 1999, p. 69.

The General Accounting Office (GAO) is the investigative arm of Congress. Charged with examining matters relating to receipt and disbursement of public funds, GAO performs audits and evaluations of government programs and activities.

The National Research Council (NRC) is the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public and scientific and engineering communities. NRC is administered jointly by both Academies and the Institute of Medicine.

FROM THE ARCHIVE