Wednesday, April 20, 2005

IMF Urges OPEC To Implement Reserves Transparency

At the risk of running a story from Al Jazeera (which of the about three or five websites with that name is it this time?), I forward this bit in which the IMF recommends greater transparency from energy producers:
The IMF strongly urges full oil data transparency to document current global oil reserves and their locations. By referring to the lack of data transparency in "non-OECD" (Organisation for Economic Cooperation and Development) countries, the IMF is telling Opec to allow its reserves to be fully audited, and soon.


Inadequate data transparency is particularly harmful because it contributes to increased perceptions of risk and consequently, a reduced willingness to invest. This ultimately increases price volatility, the report says.

As a worst case scenario, the IMF contemplates the prospect of data on Opec reserves turning out to be false. The IMF says that by 2010 the demand on Opec supply will be 32mbd, an increase of around 3mbd "excluding inventory changes".

"Inventory changes" is shorthand for the possibility that Opec may not have as much oil as its data shows. If inventories have to be changed, or marked down, then Opec may find it impossible to meet demand. That would throw every forecast wholly out of sync.

Twelve months ago it would have been unlikely to see such strongly worded questioning of production and reserve data from a body such as the IMF. What they will be saying in another 12 months is anyone's guess.