Peak Oil Exports

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Includes: BNO, DBO, DNO, DTO, DWT, OIL, OILK, OILX, OLEM, OLO, SCO, SZO, UCO, USL, USO, UWT
by: Euan Mearns

Joint Post with Neil Mearns who has constructed Global Energy Graphed, which is the source of all the graphs in this post.

An oil export model has been developed based on BP Statistical Review 2016 oil production and oil consumption data. The model shows that global oil exports peaked in 2006 at 37.87 Mbpd. They have since fallen very slowly to stand at 37.07 Mbpd in 2015, the last year for which we have data. Exports have effectively been on a plateau since 2005. What this means is that much of the production growth seen in the exporting countries has been swallowed by consumption growth in these same countries. The impact of static oil exports on the global economy is for others to work out.

Former readers of The Oil Drum will no doubt recall the Export Land Model (note that it even has its own Wiki page) that was introduced by Westexas (aka Jeffrey Brown) at a time when global oil production stubbornly refused to peak and decline as peak oilers expected it to do. Put simply, the export land model describes countries where rising domestic consumption, declining production or a combination of both results in a rapid decline in oil exports to the point where one-time oil exporters evolve into oil importing nations.

The poster child for the export land model was Indonesia, one-time member of OPEC and major oil exporter, which watched exports evaporate as oil production went into decline while domestic oil consumption ballooned (Figure 1). Production peaked at 1.69 Mbpd in 1977 but only began to decline post-1991. But as population and prosperity rose, the production surplus turned to deficit in 2003 and by 2015, Indonesia imported 740,000 bpd. Should this be repeated in many of the oil exporting countries, it must surely leave the oil importing countries gasping for breath.

Figure 1 Indonesia is the poster child for the export land model where declining production combined with growing consumption saw substantial exports converted to substantial imports. Several other countries display this phenomenon and are listed in Appendix 2.

Data and methods

Seasoned analysts will know that there are certain issues with the BP oil production and consumption data. In short, global oil consumption exceeds production by a fair margin (Figure 2). BP, which is among the most seasoned of all analysts, have this to say in a footnote to the oil consumption data:

Differences between these world consumption figures and world production statistics are accounted for by stock changes, consumption of non-petroleum additives and substitute fuels, and unavoidable disparities in the definition, measurement or conversion of oil supply and demand data.

In short, BP includes biofuel consumption in oil consumption but not in the oil supply numbers. And volumetric expansion of oil during the refining process is also included in the consumption figures giving rise to the apparent excess of demand over supply.

Figure 2 Global oil production and consumption data as reported by BP. The excess of consumption over production is probably accounted for by the inclusion of biofuels and refinery gains in the consumption figures.

At the global level, we have deducted biofuels production from the consumption figures and then applied a downwards correction of 2.62% for refinery gains since 1982 as deduced from data reported in the IEA OMR. Doing so brings production and consumption into near perfect alignment since 1982 (Figure 3). We do not know why production is higher than consumption pre-1982. This correction has then been applied to the oil consumption data on a country-by-country basis. We then assume that production less consumption, shown as balance on the charts, is a proxy for oil imports or exports.

Figure 3 Adjusting the consumption data shown in Figure 2 for biofuels since 1990 and refinery gains at 2.62% since 1982 brings the production and consumption figures into near perfect alignment.

Global Pattern of Exports and Imports

To simplify our approach, production–consumption charts have been prepared for 7 continents/regions:

North America
South America
Former Soviet Union
Europe
Middle East
Africa
Asia Pacific

Of those, North America, Europe and Asia Pacific are net importers (Appendix 1) while S. America, the FSU, the Middle East and Africa are net exporters of oil (Appendix 1). The aggregate for the 4 exporting regions is shown in Figure 4 and the aggregate for the 3 importing regions in Figure 5. Note how the balance on these two charts provide near perfect symmetry. In 2015, the net exports from the exporters was 37.07 Mbpd while the net imports of the importers was 36.23 Mbpd. The difference may be accounted for by stock change.

Figure 4 Production and consumption data for S. America, the Middle East, the FSU and Africa showing the large export balance of 37.07 Mbpd in 2015.

Figure 5 Production and consumption data for N. America, Europe and Asia Pacific showing the large import balance of 36.23 Mbpd in 2015.

Discussion

Oil exports hit a low of 16.48 Mbpd in 1985 in the aftermath of the 1980s' oil crisis, and reached a high of 37.87 Mbpd in 2006. Since then, oil exports have drifted sideways and slowly down. This corresponds to the period of record high oil prices that ended in late 2014. The reason for the oil price crash was transient reduced demand for oil exports as the USA became increasingly self-sufficient.

Does this lend support to the idea behind the export land model? We need to see if the experience in Indonesia has been repeated elsewhere and we find that it has. Egypt provides a good example where exports of 520,000 Bpd in 1993 have turned into imports of 80,000 Bpd in 2015 (Figure 6). The UK, Denmark, China, Malaysia, Vietnam and Argentina all exhibit the same behaviour and Algeria looks like it is on its way (Appendix 2).


Figure 6 Egypt has experienced the same fate as Indonesia with falling production, and in particular, rising consumption has seen significant exports of 520,000 bpd in 1993 converted to imports of 80,000 bpd in 2015. The possibility of falling oil revenues contributing to civil unrest in Egypt needs to be considered.

Throughout the developing world, there is an undoubted trend towards population growth, rising prosperity and increased oil and energy consumption. And in conventional oil basins, there is a distinct tendency for oil production to peak or to plateau while noting that the plunge from exports to imports in Egypt, China, Malaysia and Vietnam is driven more by rising consumption than by falling production.

To set against these trends seen in conventional oil producers, we need to look at the experience of the USA where non-conventional oil has been a game changer (Figure 7).


Figure 7 US consumption has stopped rising while production has begun to grow significantly taking the USA in the opposite direction to the export land countries.

The USA is a very substantial player in global oil markets. Oil imports peaked at 13.22 Mbpd in 2005. But then consumption stopped growing under the weight of high prices, the financial crash and policy. A short while after production began to grow significantly, stimulated by high price and the shale revolution. The USA is therefore moving in the exact opposite direction of the export land countries. Imports had fallen to 5.59 Mbpd in 2015 and the USA seems destined to become oil self-sufficient in the next few years that may lead to a rearrangement of the global military order.

Conclusions

  1. Several countries record a rise and fall in oil exports due to combinations of falling supply and rising demand confirming the broad principles of the export land model. But these countries do not represent a significant portion of global production. This may adversely affect the countries involved but does not significantly impact the international oil trade.
  2. The main exporting regions – The Middle East and the Former Soviet Union – do not yet exhibit signs of falling exports. In Russia, both production and consumption are stable. In the Middle East, consumption is rising but not as fast as production and exports continue to rise slowly.
  3. The only region to exhibit export land features is Africa, but it is still decades away from becoming a net importer.
  4. Having said this, global oil exports rose from 1985 to 2005 but have been flat to slowly falling since. This corresponds with the period of record high oil price and signals scarcity.
  5. Scarcity has been solved in N. America with shale oil and oil sands production and this region is heading in the opposite direction to the rest of the world with fast shrinking imports in part made possible by contracting demand caused by high price.
  6. It remains to be seen if the shale miracle can be replicated elsewhere and I certainly would not bet against this in the wide-open wilderness areas of Russia, Africa and East Asia.

Footnotes

While I am quite keen that this post should be cross-posted to other blogs, I'm unsure that bloggers will be able to grab and re-post the charts. I am investigating this issue and if it is not possible, I will convert figures 1 to 7 to PNG screen caps and ask cross posters to link back to the original to get access to the appendices.

Appendix 1

Regional summary charts for oil production/consumption and balance.

Oil Importers


NA Oil 3 The shale revolution and Alberta oil sands of Canada means that N. America will shortly become self-sufficient in oil which must surely herald a new order for security arrangements in the Middle East.


EUR Oil 4 Europe has been a serial oil importer since the oil age began. The North Sea provided some brief respite. The 10 Mbpd of imports is matched by the 10 Mbpd of exports from the FSU. Given that N. America is close to becoming oil independent, while Europe continues to import 10 Mbpd from nations viewed as hostile, it is easy to understand why President Trump wants Europe to spend more on defence.


AP Oil 3 The Asia Pacific is almost as poor in oil resources as Europe but has experienced phenomenal growth in oil consumption. At the global scale, growth in Asia Pacific imports has been met mainly from growth in exports from the Middle East.

Oil Exporters


ME Oil 3 The Middle East shows signs of the export land phenomenon where exports have grown less rapidly than production as domestic consumption has taken a rising share. However, the balance on this chart does not look like turning down any time soon, and I dare say the Middle East will still be exporting oil in 2050. Amongst other things, the UAE, Saudi Arabia and Iran all have nuclear programs that may reduce domestic oil demand.


FSU Oil 3 The FSU is the largest oil exporter after the Middle East. Production and consumption are both stable and I dare say will remain so for some time to come.


SA Oil 3 S. America, like N. America, is almost in production–consumption balance. There is a symmetry about this chart where consumption has grown broadly in line with production. With exports of 1.21 Mbpd in 2015, S. America is not a big player in the global oil exchange.


AFR Oil 3 Africa is the only exporting region to show definite signs of the export land phenomenon. Production peaked at 11.19 Mbpd in 2007. Exports peaked that same year at 8.21 Mbpd and have since declined to 5.24 Mbpd. Growing consumption all the while taking a larger share. The pattern is however impacted by loss of production in Libya. There has been a lot of new oil discovered in E. Africa in the last decade and it will be premature to assume that production will continue to decline.

Appendix 2

Production, consumption and balance charts for countries exhibiting some of the export land phenomena where exports have been swallowed by declining production, rising consumption or both.


EUR Oil 6


EUR Oil 7


AFR Oil 6


AFR Oil 7


AP Oil 4


AP Oil 6


AP Oil 7


AP Oil 10


SA Oil 7

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