International management of strategically hoarded oil has always been a tenuous proposition.
If the system is to work, governments must yield individual interests to group goals in times of oil-supply crisis.
During an emergency, the government of a country holding oil in strategic storage and needing it might be compelled to share with other countries, some with no oil hoards of their own.
The sharing obligation is central to the International Energy Agency's emergency program.
The group's oil-importing members must hold oil in state-controlled inventory, now totaling 1.3 billion bbl with the US accounting for nearly half. And all 26 members must share oil in a supply emergency.
Can it work? With Iraqi production likely to cease if there's a war, with Venezuelan exports crimped by political turmoil, and with commercial inventories perilously low, the question is urgent.
US Energy Sec. Spencer Abraham offered important clarification on Feb. 25 when he told a Senate committee that the US would decide on use of crude oil from its Strategic Petroleum Reserve only in consultation with partners in the IEA oil-sharing agreement (OGJ Online, Feb. 26, 2003).
"We do not believe it (SPR oil) should be used to address price fluctuations," he said.
So SPR crude won't enter the market immediately.
The declaration assures Saudi Arabia and other exporters now raising production that the US won't undercut the effort—and their revenue windfall—with SPR oil.
It tells consumers that the need to conserve is real because the government won't short-circuit an essential market adjustment by manipulating supply.
And it leaves oil in storage against the ominous prospect of worsening market distress.
But it doesn't answer the question about whether IEA oil sharing can work
Abraham can't provide that answer. He can only promise to consult IEA, which he has done.
The best indication at hand about the collegiality essential to successful and effective oil sharing in a crisis doesn't come from any single country's energy authority.
It comes from the United Nations Security Council, not lately a splendid prototype of international decision-making.
At least no IEA member holds veto power.
(Online Feb. 28, 2003; author's e-mail: [email protected])
