Topics Covered: Important international institutions.
International Energy Agency (IEA)
What to study?
For Prelims: IEA- objectives, functions, reports and members.
For Mains: Significance and its role in ensuring energy security.
Context: IEA has made some observations about the impact of global lockdown on oil demands across the world.
- The price of crude has already fallen about 60% since the start of the year due to a pricing war between Saudi Arabia and Russia and then the economic devastation wrought by the virus outbreak.
- Now, global demand for oil will fall this year by the most ever due to the economic lockdowns enforced around the world to contain the coronavirus pandemic.
- An estimated drop in demand of 9.3 million barrels a day this year is equivalent to a decade’s worth of growth.
Impact and implications of these changes:
- While the cheaper energy can be helpful for consumers and energy-hungry businesses, it is below the cost of production.
- That is eating away at the state finances of oil-producing countries, many of whom are relatively poor economies, and pushing companies to bankruptcy.
- With broad limits on travel and business, many consumers are unable to take advantage of the low prices anyway.
- The recent deal by OPEC and other countries to reduce global output by some 9.7 million barrels a day will help stabilize the situation somewhat.
- On top of those cuts, countries like China, India, South Korea and the United States will look to buy more oil to store away in strategic reserves.
Established in 1974 as per framework of the OECD, IEA is an autonomous intergovernmental organisation. MISSION – To ensure reliable, affordable and clean energy for its member countries and beyond. Its mission is guided by four main areas of focus: energy security, economic development, environmental awareness and engagement worldwide Headquarters (Secretariat): Paris, France.
Roles and functions:
Established in the wake of the 1973-1974 oil crisis, to help its members respond to major oil supply disruptions, a role it continues to fulfil today. IEA’s mandate has expanded over time to include tracking and analyzing global key energy trends, promoting sound energy policy, and fostering multinational energy technology cooperation.
Composition and eligibility:
It has 30 members at present. IEA family also includes eight association countries. A candidate country must be a member country of the OECD. But all OECD members are not IEA members. To become member a candidate country must demonstrate that it has:
- Crude oil and/or product reserves equivalent to 90 days of the previous year’s net imports, to which the government has immediate access (even if it does not own them directly) and could be used to address disruptions to global oil supply.
- A demand restraint programme to reduce national oil consumption by up to 10%.
- Legislation and organisation to operate the Co-ordinated Emergency Response Measures (CERM) on a national basis.
- Legislation and measures to ensure that all oil companies under its jurisdiction report information upon request.
- Measures in place to ensure the capability of contributing its share of an IEA collective action.
- Global Energy & CO2 Status Report.
- World Energy Outlook.
- World Energy Statistics.
- World Energy Balances.
- Energy Technology Perspectives.
- Various reports released by IEA.
- Composition of OECD and OPEC? Who can become members?
- Top crude oil producers and importers globally?
- Who are associate members of IEA?
- What kind of IEA member is India?
Write a note on objectives and functions of the International Energy Agency.
Sources: the Hindu.