International Energy Agency: How the Agency Prepares Its World Oil Market
Statistics (Letter Report, 05/07/1999, GAO/RCED-99-142).
Oil companies, investment firms, governments, and other players in the
world oil market need timely and accurate information on world oil
supply, demand, and stocks to make decisions about current and future
sales and purchases of oil. The International Energy Agency (IEA), which
was established in the wake of the 1973-74 Arab oil embargo, is a source
of such information. This report answers the following questions: How
does IEA prepare its historical and projected world oil market
statistics? What accounted for the missing barrels in IEA's historical
world oil market statistics in 1998?
--------------------------- Indexing Terms -----------------------------
REPORTNUM: RCED-99-142
TITLE: International Energy Agency: How the Agency Prepares Its
World Oil Market Statistics
DATE: 05/07/1999
SUBJECT: Surveys
International organizations
Economic analysis
Oil resources
Statistical data
Data integrity
Projections
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United States General Accounting Office GAO Report
to the Chairman, Committee on the Budget, United States Senate May
1999 INTERNATIONAL ENERGY AGENCY How the Agency Prepares
Its World Oil Market Statistics GAO/RCED-99-142 United States
General Accounting Office GAO Washington, D.C. 20548
Letter Resources, Community, and Economic Development Division B-
282384
Letter May 7, 1999 The Honorable Pete V. Domenici Chairman,
Committee on the Budget United States Senate Dear Mr. Chairman:
Oil companies, investment firms, governments, and other
participants in the world oil market need timely and accurate
information on world oil supply, demand, and stocks to make
decisions about current and future sales and purchases of oil.1
The International Energy Agency (IEA), among other sources,
provides such information to participants in the world oil market.
IEA is an organization of 24 industrialized member nations that
was established in the wake of the 1973-74 Arab oil embargo.2
Based in Paris, IEA is an autonomous organization within the
framework of the Organization for Economic Cooperation and
Development (OECD).3 In addition to other functions, IEA develops
detailed statistics on world oil supply, demand, and stocks that
it publishes in its monthly Oil Market Report. The objective of
the report is to show historical statistics for the preceding 4
years and up to 18 months of projections.4 In general, when the
historical statistics show a difference between the quantity of
oil supplied and the quantity demanded, that is, an excess of
supply over demand, or vice versa, such a difference is expected
to be reflected in a change in oil stocks. Differences between
the historical world oil supply 1 The International Energy Agency
uses the term "stocks" to refer to oil in inventory. Accordingly,
unless otherwise stated, we will use stocks in this report to
refer to oil in inventory. 2 The 24 member countries of IEA are
Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Greece, Hungary, Ireland, Italy, Japan, Luxembourg, the
Netherlands, New Zealand, Norway, Portugal, Spain, Sweden,
Switzerland, Turkey, the United Kingdom, and the United States. 3
OECD is an international organization that monitors economic
trends in the free market economies of its 29 members. Its
member-countries include the 24 IEA member nations and the Czech
Republic, Iceland, South Korea, Mexico, and Poland. 4 IEA's oil
market projections are prepared every summer and revised monthly.
Page 1 GAO/RCED-99-
142 International Energy Agency B-282384 and demand statistics
that are not accounted for by changes in OECD oil stocks can be
generally referred to as "missing barrels." 5 In its April 1998
issue of the Oil Market Report, IEA reported that differences
existed between its world oil supply and demand statistics that
could not be accounted for by changes in stocks, implying that
some oil was missing. Concerned about the overall quality of
IEA's world oil market statistics and the importance of such
information to the world oil market, you asked us to review how
IEA prepares its world oil market statistics and to examine the
issue of the missing barrels. Specifically, as agreed with your
office, this report responds to the following questions: (1) How
does IEA prepare its historical and projected world oil market
statistics? and (2) What accounted for the missing barrels in
IEA's historical world oil market statistics in 1998? Results in
Brief IEA uses a "bottom-up" approach to prepare its historical
and projected oil market statistics. Under this approach, IEA
constructs historical and projected oil market statistics for
individual countries and adds them together to develop world
totals. For its historical statistics, IEA uses questionnaires
and information from various other sources--such as national
governments, international organizations, and oil companies--to
obtain the data. According to oil market experts we spoke with,
IEA's historical statistics are the best available data on world
oil supply, demand, and stocks.6 For its projected statistics,
IEA uses its own analysis and judgments based on a number of
factors that influence world oil supply and demand. These factors
include, for example, for supply, changes in oil production rates
for 400 oil fields and, for demand, changes in the structure of
the economy and energy demand of each country. IEA keeps the
price of oil constant throughout the projection period because the
agency has a policy of not forecasting oil price. 5 IEA refers to
these imbalances as "miscellaneous to balance" in its Oil Market
Report but indicated that they can be referred to as missing
barrels. More specifically, IEA refers to the imbalances as
missing barrels if non-OECD oil stocks are assumed to be zero and
there is no change in the amount of oil in "floating
storage"/transit (see the report section on IEA's Historical Oil
Statistics for more discussion on oil in floating
storage/transit). 6 Oil market experts and officials we contacted
preferred not to be identified individually. Accordingly,
throughout the report, we have maintained their anonymity and, for
the most part, presented aggregate views collectively expressed by
these experts and officials. App. I shows a full listing of the
companies, agencies, and organizations we contacted. Page 2
GAO/RCED-99-142 International Energy Agency B-282384 Missing
barrels are accounted for by two factors: (1) limitations in the
statistics on oil supply, demand, and stocks reported to IEA, such
as preliminary data that are subject to future revision; and (2)
actual oil held in stocks but not reported as part of IEA's
official oil stock statistics. Although highlighted by IEA in
April 1998, missing barrels are not new, having occurred in 24 of
the last 26 years. In 1998, IEA estimated world oil supply at
75.3 million barrels per day, world oil demand at 73.7 million
barrels per day, and increases in OECD oil stocks at 0.4 million
barrels per day. The remaining 1.2 million barrels per day (or
438 million barrels for the year) are the estimated missing
barrels for 1998, and represent about 1.6 percent of the
approximately 75 million barrels traded in the world oil market
every day. IEA Uses a Bottom-Up IEA prepares its historical and
projected oil market statistics using a Approach to Prepare
bottom-up approach that relies on statistics for each country.
These statistics are developed through questionnaires and other
information Its Historical and sources,
depending on the country. Projected Oil Market Statistics IEA's
Historical Oil Statistics In developing its historical oil
statistics, as illustrated in figure 1, IEA relies on its access
to data through questionnaires from all OECD countries and
augments this information with data from oil companies, consulting
groups, and other sources. Because IEA does not have the same
access to data through questionnaires from non-OECD countries, it
relies on a wide variety of sources for information, according to
IEA officials. Page 3 GAO/RCED-99-
142 International Energy Agency B-282384 Figure 1: IEA's
Framework for Developing Its Historical World Oil Market
Statistics OECD *Monthly questionnaire *Variety of other sources
to supplement IEA Judgement/
estimation added Non-OECD *Variety of sources, such as,
governments, international organizations, etc. Source:
Information from IEA. In developing their historical statistics on
oil supply, IEA officials said that they obtain the data directly
from the OECD member governments, oil companies, and consulting
groups. IEA then checks these detailed country-level data against
totals for similar, more aggregated data that are reported
separately through its monthly oil statistics questionnaire. This
questionnaire, sent to all 29 OECD countries, asks for official
information on oil supply (production), demand, and stocks. To
complete the statistics on world oil supply, IEA obtains data for
non-OECD countries through governments, international
organizations (such as the United Nations and the World Bank), oil
companies, and the oil industry trade press. IEA officials said
they use a similar approach in developing their historical
statistics on world oil demand and stocks. That is, they use a
questionnaire to develop information on oil demand and stock
levels for each OECD country, while they rely on a variety of
sources to develop the demand data for non-OECD countries. IEA
officials said that IEA does not collect statistics on oil stocks
in the non-OECD countries. IEA's statistics include oil that is in
"floating storage" (that is, being held in marine tankers used for
temporary storage) and oil in transit at sea by obtaining
estimates of oil in these sources from firms that monitor oil
tanker traffic. This oil may be from OECD and/or non-OECD
countries. However, IEA officials said that because the statistics
on oil in floating Page 4
GAO/RCED-99-142 International Energy Agency B-282384 storage and
in transit at sea are estimates, they might not necessarily
represent the actual amounts of oil in these situations.
Historical Statistics Are the Best Many of the oil market
officials and experts we talked to said that IEA's Available but
Have Some historical oil market statistics are the
best available because the agency's Limitations
unique direct access to the national governments allows it to
collect comprehensive data. They also said IEA's long history and
familiarity with data from these governments and other entities
allow it to make better judgments about the reasonableness of the
data being provided and thus follow up on apparent
inconsistencies. IEA officials told us that the statistics from
the OECD countries are generally of better quality and more
reliable than those from the non-OECD countries. Nonetheless, IEA
officials pointed out certain limitations regarding the historical
statistics on supply, demand, and stocks for both OECD and non-
OECD countries. These limitations can introduce errors into the
data, although the magnitude and direction of these errors are not
clear. For historical supply statistics, IEA officials said that
some of the numbers reported to them are preliminary and, as such,
are subject to revision. They also stated that they use their
judgment to estimate and fill in data not available from various
sources, or reconcile data collected from multiple sources. In
addition, they mentioned that significant time lags exist in some
of the reported data. For example, data reported to IEA for its
December 1998 issue of the Oil Market Report could have lags of up
to 12 months for some non-OECD countries. That is, some producing
countries would report data as of December 1997. In these cases,
IEA officials said that they use estimated statistics to fill in
the months of 1998, until data become available later from the
usual sources.7 Such estimates, to the extent that they remain
estimates, may overstate or understate oil supply for the
applicable months. In the case of historical demand statistics,
IEA officials told us that they also use judgments and/or
estimations to fill in missing data and reconcile data collected
from multiple sources. In addition, some of the non-OECD
countries report their demand data in quarterly and annual
averages. In these cases, IEA breaks the data into monthly
averages using its judgment and analysis of prior years' monthly
patterns or patterns in neighboring 7 This is different from
missing data. While lagged data may later be reported to IEA,
allowing it to replace the estimated ones in a future issue of the
report, missing data are not likely to become available from the
sources that IEA relies on. Page 5
GAO/RCED-99-142 International Energy Agency B-282384 countries,
which may not necessarily represent the actual monthly numbers.
The officials also pointed out that monthly oil demand data are
not available for the Former Soviet Union and China, two countries
that account for about one-third of the non-OECD oil demand. IEA
officials said that they use "apparent demand," defined as oil
production minus net oil exports, as a surrogate for these two
countries' demand. However, such apparent demand estimates are
only approximations because, as IEA officials pointed out to us,
export data from non-OECD countries, including China and the
Former Soviet Union, are not reliable. For the statistics on oil
stocks, IEA officials noted that they do not collect data for non-
OECD countries and that the statistics on stocks of OECD countries
include only primary stocks, such as those held in refineries, oil
terminals, and pipelines. These OECD oil stocks do not account
for oil held in relatively small storage facilities (known as
independent storage) in various OECD locations. According to IEA,
these independent storage stocks can add up to a large quantity of
oil. Finally, reported OECD stock data are often preliminary and
subject to revision. IEA's Projected Oil Statistics IEA prepares
its oil supply and demand projections on the basis of its own Are
Based on Its Own analysis and judgments; IEA
officials do not consider them as forecasts.8 Analysis and
Judgments The supply projections are based on IEA's
analysis of 400 individual oil fields and areas in the 77 oil-
producing countries. Members of the Organization of Petroleum
Exporting Countries (OPEC) are not included in this projection
because IEA would, in effect, be indicating the potential
direction of world oil price by predicting OPEC supply. (See
below for how IEA treats OPEC supply.) According to IEA
officials, to derive the supply projections, their analysis
includes judgments about such factors as the rate at which oil
production from each field will increase or decline, the length of
time for a field's production to peak and stabilize, field
maintenance, and start-up dates for new fields. In developing its
supply projections, IEA's analysis also considers the operating
capacity of oil exploration and production support and service
industries such as drillers and equipment and service contractors.
In addition, IEA considers other oil production-related
information obtained from oil field operators, producer-country
governments, consultancies, and the oil industry trade 8 According
to IEA, a forecast would entail predicting OPEC supply and crude
oil and petroleum product prices, and their effects on demand and
non-OPEC supply. OPEC was created in 1960; its current members
include Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria,
Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. Page
6 GAO/RCED-99-142
International Energy Agency B-282384 press. IEA officials told us
that they assume that the price of oil remains constant throughout
the projection period because IEA has a policy of not forecasting
the price of oil. Furthermore, the officials said that they do
not make adjustments for contingent factors, such as potential
weather-related events or other random disruptions, like equipment
failures and disruptions in oilfields located in politically
unstable areas. To prepare its projected statistics of world oil
demand, IEA officials told us that they consider historical data
on oil demand and economic growth rates for each country in the
world as a backdrop for their judgments and assumptions. They
then consider, for each country, such factors as the changes in
the share of each fuel used relative to the aggregate energy used
as well as changes in the structure of the economy. As in the
case of supply, the demand projections assume normal weather
conditions and constant oil price throughout the projection
period. In its analyses, IEA's projected world oil demand exceeds
the projected supply from the 77 non-OPEC countries. IEA assumes
that OPEC supply and stock change will make up the difference.
Missing Barrels Are IEA and most of the oil industry
officials and market experts we contacted Due to Limitations in
told us that the missing barrels in IEA's oil market statistics
are due to both limitations in the historical oil market data and
the data on actual oil held Statistics and in
stocks that are not part of the statistics on oil stocks covered
by IEA. Unreported Oil Stocks Furthermore, they could not quantify
how much of the missing barrels are due to statistical limitations
and how much are the result of physical oil storage in unreported
stocks. Moreover, missing barrels are not a new condition, and
the amount and direction of the missing barrels have fluctuated
over time. As discussed earlier, although the historical oil
statistics published by IEA are considered by oil market experts
to be the best available, they have limitations that can introduce
errors. Such limitations suggest that, at any point in time, the
historical oil supply and demand as well as the stock data
reported by IEA could be overstated or understated by an unknown
magnitude. In fact, IEA officials told us that they continuously
revise their historical statistics over time, as new information
becomes available. This means that the reported amount of missing
barrels at any point in time could later change and become smaller
or larger, positive or negative. Page 7
GAO/RCED-99-142 International Energy Agency B-282384 IEA and most
oil industry and market officials we contacted told us that part
of the missing barrels in 1998 could be oil physically held in
stocks that are not counted by IEA statistics. IEA's statistics
on oil stocks do not account for non-OECD stocks. IEA and several
oil market experts that we contacted told us that some of the
missing barrels could be in storage tanks located in non-OECD
countries. They also said that some of the oil could be in some
independent storage tanks in OECD countries that are not reported
in the official statistics on oil stocks submitted to IEA, or in
the previously mentioned "floating storage" and oil in transit at
sea. According to several experts we talked to, oil might be
stored because the price of oil during 1998 was, more often than
not, higher in the future months than in the near-term months.
This provided an incentive for increased oil storage for future
sale. Number of Barrels Missing According to the historical
statistics in the February 1999 issue of IEA's Oil in 1998
Market Report, an average of 1.2 million barrels per day , or a
total of 438 million barrels of oil for the year, were regarded as
missing in 1998. Table 1 shows IEA's statistics on world oil
supply, demand, OECD oil stock change, and floating storage/oil in
transit in 1998. For example, average world oil supply for 1998
was 75.3 million barrels per day, while world oil demand was 73.7
million barrels per day. Thus, world supply exceeded world demand
by 1.6 million barrels per day. This implies that world oil stock
should have increased by that much. However, the stock data
reported to IEA by OECD countries showed that stocks increased by
only 0.4 million barrels per day, and the amount of oil in
floating storage/in transit did not change. Therefore, an average
1.2 million barrels of oil per day were unaccounted for, or
missing, in 1998. Page 8 GAO/RCED-
99-142 International Energy Agency B-282384 Table 1: Missing
Barrels in 1998 (Millions of barrels per day) 1st Quarter 98
2nd Quarter 98 3rd Quarter 98 4th Quarter 98
Average 98 Supply 76.5
75.6 74.1 74.9
75.3 Demand 74.5
72.1 73.2 74.8
73.7 Supply exceeds demand
1.9 3.4 0.9
0.1 1.6 OECD Oil Stock change
-0.1 1.7 0.4
-0.5 0.4 Floating Storage/Oil in Transit
0.2 0.1 0.0
-0.1 0.0 Missing barrels
1.9 1.7 0.5
0.6 1.2 Note: Numbers may not total because of
rounding. Source: IEA data from table 1, World Oil Supply and
Demand, Oil Market Report, Feb. 9, 1999. As the table shows, a
larger portion of the missing barrels in 1998 occurred during the
first half of the year, with about 1.9 million barrels per day in
the first quarter and 1.7 million barrels per day in the second
quarter. These levels decreased considerably by the third and
fourth quarters, with missing barrels dropping to 0.5 million
barrels per day and 0.6 million barrels per day, respectively. An
average of 1.2 million barrels per day (or 438 million barrels of
oil for the year) that were missing in 1998 represent about 1.6
percent of the 75 million barrels per day traded in the world oil
market.9 Thus, about a 0.8 percent error in the historical
statistics for both oil supply and demand could account for the
entire year's missing barrels. Missing Barrels Are Not
Differences between IEA's historical world oil supply and demand
New statistics, which are
not reflected in changes in oil stocks, are not new and have been
larger and smaller in the past. Using IEA's data from 1973 to
1998, figure 2 shows missing barrels have occurred in 24 of the
last 26 years, in varying magnitudes and directions. For example,
the number of missing barrels was higher than the 1998 level in
1973, 1974, and 1976, averaging about 1.6 million barrels per day
in 1974 and 1.3 million barrels per day each in 1973 and 1976. On
the other hand, the number was lower 9 The 75 million barrels per
day of oil is the average of the supply and demand for 1998. Page
9 GAO/RCED-99-142
International Energy Agency B-282384 for all the other years
shown, with no missing barrels in 1978 and 1984. Similarly, 14 of
the 26 years had positive missing barrels, while 10 other years
had negative missing barrels. Positive missing barrels implies
that oil supply exceeded demand but was not reflected in stock
increases, while negative missing barrels implies that oil demand
exceeded supply but was not reflected in the amount of oil drawn
from stocks. Figure 2: Missing Barrels, 1973-98 Source: IEA.
Agency Comments and We provided a draft of this report to IEA for
review and comment. We Our Evaluation discussed
the report with IEA officials, including the Head, Oil Industry
and Markets Division, which prepares the Oil Market Report, and
the Head, Statistics Division. IEA agreed with the report and
provided clarifying comments that we incorporated, where
appropriate. Page 10 GAO/RCED-99-
142 International Energy Agency B-282384 Scope and To
determine how IEA prepares its statistics on world oil supply,
demand, Methodology and stocks, we interviewed IEA officials
and reviewed relevant documents from the agency. We also
interviewed other oil industry and market officials to gain an
understanding of their familiarity with how IEA prepares its world
oil market statistics. Appendix I lists all the companies,
agencies, and organizations we contacted. To determine what
accounted for the missing barrels in IEA's world oil market
statistics in 1998, we interviewed IEA and other oil industry and
market officials. We also reviewed relevant documents from IEA
and other sources and analyzed oil market statistics from IEA and
others. We conducted our review from November 1998 through April
1999 in accordance with generally accepted government auditing
standards. As arranged with your office, unless you publicly
announce its contents earlier, we plan no further distribution of
this report until 30 days after the date of this letter. At that
time, we will send copies to Senator Frank Murkowski, Chairman,
and Senator Jeff Bingaman, Ranking Minority Member, Senate
Committee on Energy and Natural Resources; Senator Don Nickles,
Chairman, and Senator Bob Graham Ranking Minority Member,
Subcommittee on Energy Research, Development, Project, and
Regulation, Senate Committee on Energy and Natural Resources;
Representative Joe Barton, Chairman, and Representative Ralph M.
Hall, Ranking Minority Member, Subcommittee on Energy and Power,
House Committee on Commerce; and Representative Ken Calvert,
Chairman, and Representative Jerry F. Costello, Ranking Minority
Member, Subcommittee on Energy and Environment, House Committee on
Science. We will also send a copy of this report to Mr. Robert
Priddle, Executive Director of the International Energy Agency.
We will also make copies available to others on request. Page 11
GAO/RCED-99-142 International Energy Agency B-282384 Please call
me at (202) 512-3841 if you have any questions about this report.
Major contributors to this report were Daniel Haas, Godwin Agbara,
and Michael Sagalow. Sincerely yours, Susan D. Kladiva Associate
Director, Energy, Resources, and Science Issues Page 12
GAO/RCED-99-142 International Energy Agency Page 13 GAO/RCED-
99-142 International Energy Agency Appendix I Companies, Agencies,
and Organizations Contacted by GAO
Appendix I Integrated Oil British Petroleum/Amoco
Companies Mobil Oil Corporation Texaco Inc.
Federal and U.S. Department of Energy
International Agencies International Energy Agency
Consultants/Industry BT Alex Brown Incorporated Analysts
Center for Global Energy Studies Merrill Lynch & Company PIRA
Energy Group Smith Barney, Inc. Simmons and Company International
Associations American Petroleum Institute
Independent Petroleum Association of America Oil Industry Trade
Energy Intelligence Group Press (141295) Letter Page
14 GAO/RCED-99-142 International
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