Russian Oil Exports: Dropping, But Why? 18 comments
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If evidence is needed that the Export Land Model works, Russia has provided it in spades. The report posted below notes that while production was down in the 1H08 by .8% compared with 1H07, exports suffered a decline of 5.2%. The implication is that Russian domestic demand ate up the difference between production and exports.
Of course, that is not necessarily so, as George (Gershwin) once noted. It could be that Russia simply built its own inventories for whatever (hoarding) reasons. Or it could be that what seems true is true, that they simply used the balance internally.
The Export Land Model highlights the arithmetic fact that if a country’s oil production is falling and its internal oil consumption is growing (which is the case in all oil exporting economies), exports will fall at a far greater rate than production falls.
Of course, the inverse can also be true. If an oil importing country (say the U.S.) begins to use less oil internally and if its oil production is also increasing, its imports will decline at a much faster rate than its production is rising. I don’t expect to see much of a rise in U.S. oil production, but there may be some given higher prices.
Here is the report from the Russian News and Information Agency:
Russia’s oil exports decline 5.2% to 897 mln bbls in 1H08
MOSCOW, August 19 (RIA Novosti) - Russia’s oil exports declined 5.2% year-on-year in January-June to 122.5 million metric tons (897 million barrels), the country’s top statistics body said on Tuesday.
According to the Russian State Statistics Service (Rosstat), oil accounted for 36.4% of Russian exports and 52.3% of fuel and energy product exports in January-June 2008.
Rosstat reported on Monday that oil output in Russia declined 0.8% year-on-year in January-July to 283 million metric tons (2.07 bln bbls).
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This article has 18 comments:
In Russia, reinvestment in the energy sector is severely hampered by its ownership structure - nearly all state owned. The incentive for the political class is to skim off as much as possible for their other uses, treating the whole thing as a cash cow. Not to build for long term capacity.
When foreign majors came in to invest in their fields, the state let them and then took the resulting assets with minimal compensation.
Thieves are lousy capitalists. Bottom line.
...Prior to the partial TNK acquisition by BP, TNK had aggressively seized several assets from another BP joint venture, wrote The Economist in May 2007, ...
sgt.red.blue.red
backing leftist terrorists in South America.
8-D
Oil and the cash it generates are simply a means to an end.
It will force the U.S. and Europe to get back to business and out of dreamland.
I've got a long-standing position in Enel (the Italian utility), which has been aggressive in expanding in the former Eastern bloc countries since deregulation, but when they bought power generating assets in Russia, I DAMN near exited the position. Putin and his KGB thugs are EXACTLY that....thugs.
I expect an increasing amount of irrational anti-Russian and anti-Arab rhetoric (as evidenced by some of the comments above), as well as the push to drill in ANWR and off the Florida coasts. Neither will make a difference.
Russia will have to deal with the challenges of running off the Majors, but again, I would urge one to visit SLB in Moscow for a glimpse of the future.