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).