Oil importing countries should implement emergency oil saving policies if supplies fall by as little as 1m-2m barrels a day, the International Energy Agency will warn next month.
The figure is much lower than the official trigger of 7 per cent of global oil supply equivalent to 6m b/d agreed in the treaty that founded the energy watchdog for industrialised countries after the oil crisis of the 1970s. A fall in supply of just 1m-2m b/d would be equivalent to the disruptions during the 2003 Iraq war or the 2002 oil industry strike in Venezuela.
A warning to set up “demand restraint policies” in the transport sector, such as driving bans or shorter working weeks, is contained in a study to be published next month during the annual IEA meeting of energy ministers.
It comes as oil is trading at more than $55 a barrel and highlights the agency's concern about the possibility of a supply shock, the economic impact of high oil prices, and the need to focus on conserving energy rather than simply encouraging higher production.
The report marks a departure in IEA policy, as it says demand restraint measures, until now confined to times of crisis, “may be attractive during extended periods of high oil prices to relieve demand pressure”. In a draft of the report circulated to governments and seen by Expansión, the Financial Times' Spanish partner, it suggests dramatic measures, such as reducing motorway speed limits by 25 per cent, shortening the working week, imposing driving bans on certain days, providing free public transport and promoting car pooling schemes.
Such measures are being adopted in the Philippines, where civil servants will today start a compressed work week of four days, in a desperate attempt by the Manila government to cut its oil bill in the next two months.
Investment in such schemes will be needed before any crisis occurs, the IEA says. “A rapid [demand] response can send a strong market signal,” says the report, entitled “Saving Oil in a Hurry”. “A reduction in IEA transport fuel demand of even a few per cent could have a substantial damping effect on surging world oil prices.”
Energy prices rose on Thursday, with US petrol and heating oil hitting all-time highs. US crude oil rose above $55.15, up $1.16 in mid-afternoon trade. The rise was propelled by a Goldman Sachs report that said oil prices “may have entered the early stages of a super-spike period”, which could lead to prices of $105.
Claude Mandil, IEA executive director, says in the foreword of the study: “There appear to be opportunities to achieve substantial reductions in transportation oil demand quickly and cheaply if countries are prepared.” The Paris-based body told governments recently that “if supply continues to struggle to keep up, more policy attention may come to be directed at oil demand intensity in our economies and alternatives”.
The IEA says the proposals in its study could save up to 1m b/d, but acknowledge that some of them, like car-pooling or driving bans according to number plates, are difficult or costly. The IEA plans to publish another study on the matter, titled “Saving Electricity in a Hurry”, in July.