G7 presses case for data transparency
SURGING oil prices have triggered an offensive by senior ministers in the Group of Seven (G7) industrialised nations to improve the quality of oil data, seen as a major contributing factor to speculators' actions in driving prices above $50 a barrel. At a meeting of G7 finance ministers and central-bank governors, on 1 October, ahead of the IMF/World Bank annual meetings, a joint communiqué called on the International Energy Agency (IEA) to enhance its work on oil data transparency.
Spearheaded by the UK finance minister, Gordon Brown, the G7 also wants the IMF and World Bank to have an enhanced role in encouraging better and timelier information. Brown called for producers and consumers to work together to devise a phased timetable for producing transparent, high-quality, timely and reliable oil market data, which should be made available to all. Brown said insufficient data distorts economic decision-making and is a source of unnecessary volatility in oil markets—with damaging effects on global economic activity. The G7 argues that improved transparency would enable policymakers to distinguish between demand and supply effects on energy prices.
Analysts highlight the lack of transparency in the Chinese market as a critical factor behind high oil prices this year. 'China is everyone's prime suspect for what's pushed oil to $50/b. It would be nice if we had data on consumption and inventories, but the Chinese are not providing it and trying to calculate demand given the data-set available is difficult,' says Adam Sieminski, head of oil and gas markets at Deutsche Bank.
However, the lack of data transparency is not confined to China and the traditionally secretive Opec. Even US statistics, which are the most regularly published, have come up short.
Efforts are under way to improve the situation. In 2001, six major international organisations, including the IEA and Opec, supported by 90 governments, agreed to launch a data-reporting exercise, the Joint Oil Data Initiative (Jodi), aimed at assessing the quantity, quality and timeliness of basic monthly oil data.
Delegates at a Jodi conference in Indonesia last month said lapses in accuracy and incessant time lags in reporting figures to the IEA had contributed to unreliable data. Opec's deputy secretary-general, Maizar Rahman, said there was a missing 1m barrels of global supply on the water that has not been accounted for as a result of these lapses.
The pressure on key producers to improve transparency has yielded some fruit this year. After a US energy banker, Matt Simmons, suggested Saudi crude reserves may not be as large as the authorities claim, Saudi Aramco released the most detailed snapshot yet of its reserves position. And a new bilateral trade agreement signed between the US and China covers energy-data-exchanging, raising hopes for a more accurate assessment of the real Chinese demand/supply situation.
'Whether the progress on data is fast enough for people to make use of it is another question, but at least it's being considered,' says Sieminksi.