Friday, May 19, 2006

Magic Math of Karen Harbert

On 16 May 2006, House Committee on Government Reform, Subcommittee on National Security, Emerging Threats, and International Relations, conducted a joint oversight hearing on U.S. Efforts to Counter Use of “Energy as a Weapon” The written testimonies of the witnesses can be found at the Committee Website.

On 16 May 2006 Reuters passed a news piece entitled “IEA could cover cutoff of Iran oil for 4 years -DoE

Article reported Karen Harbert, assistant secretary for policy and international affairs at the DoE, saying at that hearing that "When you take all of the stocks that all of the countries hold together in the IEA, we have the ability to meet a complete shutoff of Iranian oil for over four years."

I couldn’t fine in Harbert’s written testimony any word on Iran. Maybe oral testimony was different. Anyway, let us go back to the Reuters news.
Reuter says that Iran in April pumped about 3.8 Mb/d and exports about 2.7 Mb/d. It also gives mentions that IEA member countries hold about 2.7 Gb of Industry and 1.4 Gb of government stocks of oil, making a total of 4.1 Gb.

All these figures conform to the IEA’s Monthly Oil Market Report.

Now, let us make some simple calculations and see how naïve is such a claim.

Iran exports 2.7 Mb/d of crude oil.

so, Harbert apparently used 2.7 Mb/d * 365 days * 4 years = 3.942 Gb to find out that 3.9 Gb is less than 4.1 Gb of IEA member country stocks (government and industry).

a) That 4.1 Gb are in fact OECD member stocks, which includes non-IEA members stocks.

b) Of those 4.1 Gb of OECD stocks, in fact, only 57% is crude oil and the rest is oil products.

c) So, she thinks of replacing crude oil loss with crude + products inventories.

this may sound OK on paper. Try to do it in real world. And good luck with the composition of oil products compared to demand.

d) Like the nonsense reserves/production ratio, she thinks that supply and demand will remain at today’s level in the next four years.

c) And try to allocate OECD crude and products inventories among members for 4 years.

Good Luck!

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