World Energy Outlook 2007

■ Adequate investment in production, processing, transportation and storage
capacity to meet projected needs.
■ More efficient energy use, to reduce the risk of demand running ahead of
deliverability.
■ More diversity in the fuel mix, geographic sources and types of supply,
transportation routes and market participants.
■ More market transparency, to help suppliers and consumers make
economically efficient investment and trading decisions, and governments to
take informed policy decisions.
Policies and measures to respond to short-term disruptions include
co-ordinated use of emergency energy stocks, redirected supply flows and
demand-side management (IEA, 2005). Their purpose is to alleviate rapidly
the effects of any loss of physical supply, by making good all or part of the
shortfall or by reining back demand. These measures can help to minimise the
economic and social cost of a supply disruption by facilitating the movement
by the market of scarce supplies to where they are most needed. Emergency
stocks and co-ordinated responses to a supply disruption form a central pillar
of the energy-security policies of IEA countries (Box 4.1). Governments also
adopt measures aimed at preventing supply disruptions, such as protection of
pipelines, maritime ports and sea lanes, enforcement of health and safety
regulations to prevent accidents, and early-warning systems for severe weather.
Box 4.1: IEA Emergency Response Mechanisms
The IEA’s emergency response mechanisms were set up under the 1974
Agreement on an International Energy Program (IEP). The Agreement
requires IEA countries to hold oil stocks (now standing at the equivalent of
at least 90 days of net oil imports) and, in the event of a major oil supply
disruption, to release stocks, restrain demand, switch to other fuels or
increase domestic production in a co-ordinated manner.
Implementation of IEP measures was initially designed for oil supply
disruptions involving a loss of 7% or more of normal oil supply, either for
the IEA as a whole or for any individual member country. To supplement
the mechanisms defined in the IEP, the IEA has elaborated more flexible
arrangements known as the Coordinated Emergency Response Measures
(CERM). They provide a rapid and flexible system of response to actual or
imminent oil supply disruptions of any size. The response may include
stock release, demand-restraint measures and/or use of surge-production
capacity. The last time CERM was deployed was in September 2005, when
IEA countries agreed to make available to the market 60 million barrels of
oil to help offset the loss of 1.5 million barrels per day of crude oil
…/…
162 World Energy Outlook 2007 - GLOBAL ENERGY PROSPECTS: IMPACT OF DEVELOPMENTS IN CHINA & INDIA