For the International Energy Agency, conflict with the Organization of Petroleum Exporting Countries comes naturally. IEA began life as a response to the targeted export embargo by Arab oil-producing countries in 1974. Old controversies die hard, especially in the international offices they spawn.
So there was no surprise in a clash between IEA Director Robert Priddle and Saudi Oil Minister Ali Al-Naimi late last month (see Watching the World, p. 33). Al-Naimi complained at a Paris conference about the high oil taxes of some industrial countries, which he accused of encouraging "petrophobia." In response, Priddle defended oil taxes and complained about OPEC efforts to support the price of crude oil with production restraint. Furthermore, he said, European Union finance ministers had directed him to "lead a new effort to step up diversification of energy sources away from oil."
It was the collision of two futile agendas.
Antipetroleum subtexts
Al-Naimi at least made valid points. Antipetroleum subtexts do lace the energy and environmental policies of many industrial countries. And some of those countries, especially in Europe, do heavily tax oil consumption. But the Saudi minister's arguments aren't likely to resonate among fuel consumers. Overwhelmingly, and with some reason, they think they're paying more for gasoline and heating oil than they should because of OPEC.
Al-Naimi's observation about high oil taxation also hit target. Yet here, too, his words will go unheeded. Because Saudi Arabia limits production to elevate the price of oil, his criticism of governments taxing oil for the same purpose won't find much sympathy among consumers. In any event, taxation is a sovereign function. Outsiders can criticize tax policies of countries where they don't live. But they can't do much about them.
Priddle should take the point. Taxation isn't his business. It's the business of governments and citizens of individual countries. Various European members of IEA pontificate about global taxation in response to what they perceive to be global problems, such as climate change. But it's a fantasy Priddle should avoid. Protests last summer revealed creaky domestic support for the whopping energy taxes imposed at national levels in Europe. That's hardly a solid basis for an international trend.
To the European predisposition toward higher taxes for everyone Priddle now adds a charge from finance ministers to lead energy consumers away from oil. These thrusts emerge, of course, from political Europe's unfounded urgency to do something about global warming. And they should raise questions among other IEA members. Oil and gas companies should share the concern.
Since when does the IEA director take his orders from European Union finance ministers? How does the IEA director propose to lead a diversification away from oil without compromising his agency's stated allegiance to market freedom and energy efficiency? What recourse exists for IEA members not inclined to punish energy consumers with taxes? Where in its founding documents does the IEA find justification for what it trumpets as its "leading role in the international effort to combat climate destabilization"? What international effort to combat climate destabilization? What climate destabilization?
For the last question, an answer better grounded in science than what typically emerges from, say, European finance ministers would profoundly enrich debate. Globalization of European-style energy taxation should proceed from an understanding of climate destabilization sufficient to assure taxpayers that the effort to combat it might work. No such understanding exists. Or might it be that the global diversification agenda-inevitably requiring sharply higher oil taxes abroad-simply masks European hopes to export a competitive disadvantage rooted in oppressive fiscal policy?
Important service
Priddle's agency performs an important service. It collects and reports data on an oil market that has changed greatly since the Arab embargo. The task is not easy. The market is huge, complex, and dynamic. IEA thus provides one of the best defenses available against the type of market mischief out of which it was born: information, broadly available and closely watched.
But the information loses credibility when the reporting becomes tangled in the politics of Europe or anywhere else. The defense then weakens. IEA seems smitten with official Europe's high-tax, low-science lurch toward global governance of fossil energy, which is resisted in fuel-buying Europe and doomed elsewhere. The agency needs to regain its balance.
