OPEC reports highlight confusion in energy news

Bob Tippee

Here's a public-education challenge for the oil and gas industry: Teach journalists the difference between production quotas set by the Organization of Petroleum Exporting Countries and actual production.

When OPEC raises or lowers its quotas, many news agencies report that it has raised or lowered production.

It happened again Sept. 15. OPEC ministers in Vienna lifted the collective quota for members other than Iraq to 27 million b/d, effective Nov. 1, from 26 million b/d (OGJ Online, Sept. 15, 2004). And news agencies reported that OPEC was raising production by 1 million b/d—not all of them, of course, but enough to spread confusion.

As misreported, the story seems to be that oil supply soon will increase. In fact, OPEC members together already are producing 1 million b/d more than the new quota and can't manage much more. Quota compliance, always elusive, would in fact lower production.

To pick another nit, OPEC doesn't produce oil. Its members do. OPEC mainly holds meetings in nice hotels at which the oil ministers of member countries negotiate production quotas and eat well. Afterward, most members' oil industries produce at rates that best serve government revenue needs.

When production rates approximate quotas, as they sometimes do, analysts salute OPEC's management. When the rates stray greatly from quotas, as they also sometimes do, the analysts predict the group's demise.

In either case, OPEC ministers eat well at their meetings and probably smirk at those news stories announcing that they've agreed to adjust production rather than quotas.

Does this matter? Not much.

But the oil industry is big, complex, and destined never to be popularly understood. It would profit from any improvement to public understanding of its fundamentals.

Journalists who can't tell the difference between quotas and production probably don't know the difference between NGL and LNG, either, or between refining and production, or between ozone smog and greenhouse gas.

Imprecise reports issuing from such bewilderment do little for the quality of debate on issues crucial to the energy industry.

Yes, journalists should know better. Unless someone in the industry educates them, however, they never will.

(Author's e-mail: bobt@ogjonline.com)

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