IEEJ: February 2011

Special Bulletin
A Japanese Perspective on the International Energy Landscape (28)January 26, 2011

IEA-IEF-OPEC Symposium on Energy Outlooks
Ken Koyama, PhD
Director
Strategy and Industry Research Unit
Institute of Energy Economics, JapanOn January 24, the International Energy Agency, the International Energy
Forum and the Organization of Petroleum Exporting Countries cosponsored aSymposium on Energy Outlooks at the IEF secretariat in Riyadh, Saudi Arabia. Morethan 40 experts from the three international organizations and countries mainly inEurope, the Americas and the Middle East participated in the meeting. They had
discussions based on IEA and OPEC presentations about short- and long-term energy
outlooks.
The ultimate objective of this symposium was the promotion of dialogue between
oil producing and consuming countries. In a bid to anticipate the international energy
landscape that is now described as facing “unprecedented uncertainties”, experts fromthe IEA for oil consuming countries and OPEC for oil producing nations had frank
discussions on common points and differences regarding future outlooks and various
challenges accompanying these outlooks. The role of IEF was to provide platform topromote dialogue between the two sides. The three international organizations
cosponsored the symposium as a conference to discuss international energy problems,
following a meeting and a workshop on crude oil pricing in London last November, asagreed at a gathering of IEF energy ministers that took place in Cancun last March (seeA Japanese Perspective on the International Energy Landscape (20) on November 26,2010).
The symposium first dealt with short-term outlooks through 2011. Generally,
participants might have found many common viewpoints and challenges concerning
short-term outlooks. They compared and discussed various important elements on oilmarket outlook, including economic growth projections as assumptions, global oil
supply/demand outlooks based on these economic projections, non-OPEC production
estimates, crude oil prices’ elasticity on oil supply and demand, demand for (or the callon) OPEC crude oil, and surplus OPEC production capacity as the gap between total
OPEC production capacity and the actual OPEC production. While some differenceswere seen between projected numbers for the above mentioned elements, directions andestimates regarding many of these points were basically close. Symbolically, the IEA
and OPEC presented very close estimates of an increase in the call on OPEC for thisyear (2011), which is the most important indicator of the direction of changes in the1IEEJ: February 2011

supply/demand balance.
But I also found several important differences as well. Most interesting in thisrespect were discussions on the large difference between the IEA and OPEC with regard
to global oil demand estimates for 2010. Specifically, the IEA estimated that global oil
demand in the year increased by 2.7 million barrels per day, the second-largest growthin the past decade (after the growth of nearly 3 million bpd in 2004). But OPEC
estimated the increase in 2010 at 1.6 million bpd. The OPEC-estimated growth, thoughfirm, was as much as 1.1 million bpd less than the IEA estimate. The problem is thatthe difference not only indicates the gap the views on demand itself, but also seems tosuggest the gap between their analyses of crude oil price hikes since the second half oflast year. One viewed a demand increase as large enough to tighten the supply/demandbalance and boost crude oil prices, while another interpreted the increase as a moderate
one and attributed the crude oil price hikes primarily to other factors. Such difference
might have been resulted from the gap on demand growth estimates for 2010.
In this regard, the difference in demand growth estimates may relate to a gap inviews about the influence of financial factors on crude oil prices and in prescriptions tothe price hikes. Interestingly, discussions on the influence of financial factors on crude
oil prices have become very popular and been carried out worldwide in recent years. But
there are polarized views on this issue and no easy conclusion or agreement can bereached. Sometimes in that how we view the importance of supply/demand factors
affects how we view of the importance of financial factors, in-depth discussions on thegaps on supply/demand analysis may be concluded as significant.
As for long-term outlook, there are several commonalities in the directions offuture development and predicted results between those by IEA and OPEC. But there
are many substantial differences between the two outlooks, with regard to such factors
as frameworks or scenarios for the outlook as well as some key results of the outlooks.
Such differences can be interpreted as natural because the longer-term influences ofenergy and environment policies and technology development on energy demand aremore uncertain. The presence of diversified forecasts of the uncertain future can beviewed as sound in a sense. In a sense, results of long-term outlook depend on answers
to the following questions: How stringent would restrictions on carbon dioxide
emissions be?; What policy measures would be taken in response to such restrictions?;
What policies would be adopted to address social policy problems such as energy poverty
and subsidies?; How strong would such policies be?; What elements of advanced
technologies would become “mainstream”?; Would any revolutionary event come togreatly affect the development of certain energy sources (like “shale gas revolution)?;What economic or social structure changes would accompany the development of China,India and other emerging countries?; How fast would their development be? It isdifficult to give any accurate answers to these questions at this moment. In this context,
IEA and OPEC should deepen discussions not on their forecast gaps but on their views
about the factors bringing about such gaps. Such approach may be important forenhancing their mutual understanding.
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IEEJ: February 2011

While various approaches or methods exist for enhancing and deepening mutualunderstanding, the Riyadh meeting has led to a common recognition that it is importantto focus on areas that are significant for both oil consuming and producing countries
and that feature great future uncertainties. Therefore, regional analyses concerning
China, India and Russia may be considered for a possible area of collaboration. An area
concerning research on natural gas related to the effects of the shale gas revolution may
also be a candidate for collaboration. Meanwhile, there was constructive discussion that
it would be effective to analyze and discuss the above-mentioned gaps in elements ofsupply/demand forecasts from a more technical viewpoint. For example, it was pointed
out that it would be important for experts to have in-depth discussions on historicalsupply/demand data gaps, base-year data for forecasts and definitions of various data.
This may also be considered as a specific feasible and workable idea.
Views about the future course of the international energy landscape, facing“unprecedented uncertainties”, may bring about important implications for energy andenvironment policy planners/makers, energy industry participants, the entire industry
and ordinary citizens. IEA and OPEC are expected to improve each other’s energy
supply/demand outlook through the promotion of dialogue between oil producing andconsuming countries and contribute to the stabilization of international energy markets
and to the entire international community.
Contact: report@tky.ieej.or.jp

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