With oil prices above $100 a barrel, governments should be busy boosting their analytical capacity of the energy market. Yet, the U.S. is cutting the budget of the Energy Information Administration, the agency that provides the public and private sectors both in the U.S. and overseas, with critical statistics and analysis about energy markets. The current budget provides the EIA with $95.4-million for fiscal year 2011, a reduction of about 14 per cent from the previous fiscal year. Richard Newell, the agency’s administrator, says the lower “funding level will require significant cuts” in data, analysis and forecasting. Among the cuts to services, the agency will no longer publish details of U.S. oil reserves; will cancel the planned increase in resources to improve the quality of oil data; and will curtail efforts to understand the linkages between physical markets and financial trading. It will also stop the publication of the International Energy Outlook, one of the agency’s most influential publications. The budget cut comes as the U.S. -- and its partners at the G20 group of leading nations -- say that commodities markets need more transparency. For example, this week the G20 is going to launch an initiative, know as Agricultural Market Information System, or Amis, to improve data on production, demand and stocks for food commodities. Prominent analysts and former senior officials, including Bill Richardson, energy secretary with Bill Clinton, and Spencer Abraham, energy secretary with George W. Bush, have published a letter to Congress. It says cuts to the EIA budget would “exacerbate market uncertainty, possibly curtailing investment and contributing to greater price volatility”. Daniel Yergin, president of IHS Cera and author of the classic history of crude oil The Prize; Ed Morse, head of commodities research at Citigroup; and Adam Sieminski, chief energy economist at Deutsche Bank, also signed it. Other analysts, researchers and consultants -- some of them known for their conservative fiscal stance -- also signed the letter. “The energy sector is entering tumultuous territory, with profound risks and opportunities for U.S. economic vitality and national security,” the letter continues. “One of the key principles that the U.S. has learned over decades of energy crises is the importance of high-quality, consistent information. Since its inception, the EIA has served as the unwavering embodiment of this principle.” The budget shortfall should not only worry the US. The rest of the world, myself included, also relies on the EIA for its analysis. The agency is, together with the International Energy Agency and the Opec oil cartel, the main source of analysis and statistics for energy markets. But although the EIA contributes to global understanding of the markets, only the U.S. pays for it. The budgetary constraints are good news for savvy energy speculators. They have the means to pay for the analysis and the statistics. The public will suffer the consequences.

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