Belfast Telegraph

IEA's two-fingered salute can oil wheels of recovery

By David Elliot

Roll out the barrel because the spigots have opened! The spigots aren't the first band to take to the stage at Glastonbury today but what many people in the US would call a faucet... I mean a tap.

Anyway, a past incarnation in the energy markets saw me loudly question the meaning of the term spigot in disparaging company as a random headline rolled past my eyes. The term was used to described how members of the Organisation of Petroleum Producing Countries, or OPEC, were refusing to "open the spigots" and supply more oil to the world market in an effort to temper soaring prices.

At the time of my embarrassing query, a barrel of the black stuff was trading at $60 so you can imagine the frustration of the world's governments at OPEC's refusal to budge now when the price is well above $100/bbl (then again, asking producers to increase production so as to pull prices down maybe isn't the most tactical way to go about it).

In any case, OPEC met in Vienna a couple of weeks ago and after a few days of fine dining, Cuban cigars and the odd schnitzel decided that those spigots were staying firmly shut.

Crude prices obviously spiked on the news and stayed strong, only wavering when it looked like the world's economy was looking a bit shaky.

Until today, that is.

The International Energy Agency, which represents consuming energy countries, some of which are also producers, said its members would release about two million barrels of oil a day - about 2% of global supply - onto the world market.

The IEA's two fingers to the OPEC cartel have meant the oil market has dropped like the price of turkeys on Boxing Day and that's good news for you and me when we're filling up on petrol, diesel or heating oil or for businesses struggling to deal with rising energy prices.

OPEC, which likes to see itself as the master of the world's energy market, will no doubt be furious that a rival organisation has stolen its thunder and tramped on its toes but it's about time it was given a wake-up call.

A shot across the bow of the bloated ship OPEC by the IEA will be good for us all and the effects may provide the boost to the economy we've been waiting for.

Of course, you can't depend on the oil market to do what you expect it to but hopefully the bods at OPEC will realise that by holding the world hostage with tightened oil supply they'll only be cutting off their nose to spite their face.

If energy prices stay high, businesses and consumers struggle and the economy slows thereby cutting demand for oil.

It's already got to that stage but oil producers seem oblivious to the further impact they're having on the global economy.

Let's hope they see sense soon.