- The Washington Times - Wednesday, February 20, 2008

DAVOS, Switzerland — The chief of the International Energy Agency has warned that more must be done by major oil producing and consuming nations, including China and India, to address the growing energy insecurity, exacerbated by the heightened terrorist threat, shortfalls in oil supply and market volatility.

“The physical risk due to a terrorist attack is there, so if that is happening, certainly the international community should work to counter this kind of thing,” said Nobuo Tanaka, executive director of the IEA, which has 27 rich countries, including the U.S., as members.

With oil demand in such emerging economies as China and India forecast to continue to increase, and most of it likely to be met by imports that have to be hauled through strategic choke points such as the Strait of Hormuz and the Strait of Malacca, “the risks get more and more,” he said.

In light of the growing risks, “international efforts to mitigate such a risk is very important,” Mr. Tanaka asserted in an interview on the sidelines of the 2008 World Economic Forum summit last month.

A key role of the Paris-based IEA is to coordinate measures in times of oil supply emergencies.

Since its establishmentin 1974 — at the height of the first oil crisis — as a counterweight to the growing clout of the Organization of Petroleum Exporting Countries (OPEC), the IEA has resorted to a drawdown from its strategic stockpile only twice.

The first was just before the Persian Gulf War in 1991, and the second in the aftermath of Hurricane Katrina, in the autumn of 2005.

Daniel Yergin, chairman of Cambridge Energy Research Associates, said there are two crucial issues for international security.

“One is to bring China and India into the whole structure of the international security system. The second is to pay a lot more attention to the security of the physical infrastructure from the wellhead to the consumer, because all of it was built without security of mind,” Mr. Yergin said.

Mr. Yergin, a member of the secretary of Energy’s advisory board, said: “Recent events and threats show that this is something that needs attention. Money has to be spent on it, and effort has to be expanded in it both by governments and by the private sector.”

Mr. Yergin noted that al Qaeda has threatened to attack critical infrastructure, including energy, which its leader, Osama bin Laden, has called “hinges” of the global economy.

Growing energy needs and tight oil supply are also adding to energy insecurity.

“The current level of [oil] inventory in the consuming countries is very, very low — lowest in the five-year average — and at the same time, the spare production capacity in the producing countries is also very low,” Mr. Tanaka said.

He said the IEA wants to see a little more of a buffer to such market volatility by increasing the emergency stock level.

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