Net oil exports and imports between now and 2020

[GliderGuider]

I’m very concerned about the potential effects of the Export Land Model and the decline in net oil exports on both oil prices and global economic activity. In order to investigate the potential near-term effects further, I decided to look at the recent oil production and consumption trends in the world’s top exporters and importers.

The Market Today

The world oil market currently moves about 2.3 billion tonnes of oil a year. At the moment there is a surplus of around 100 million tonnes per year, or a 4% export surplus. The market has generally been in a such surplus position since 1965, with the only notable exception being the period from 1981 to 1984 when the market operated at an average deficit of 9%.

The world’s top 15 net exporting nations in order of size are: Russia, Saudi Arabia, Iraq, Iran, Kuwait, Nigeria, UAE, Norway, Venezuela, Angola, Libya, Kazakhstan, Mexico, Algeria and Canada. Together they export about 80% of the oil on the world market.

The top 15 oil importers in order of size are: USA, China, Japan, Germany, India, South Korea, France, Spain, Italy, Singapore, Netherlands, Taiwan, Benelux , Thailand and Turkey. Together they import about 80% of the oil on the world market.

Technique

I used the BP Statistical Review of World Energy 2010 as my database. It’s pretty good, but for this exercise I also consulted EIA data to fill in a few missing pieces regarding oil consumption in some countries.

I used the production and consumption data from each of the 30 countries given above for the period 1990 to 2009. For each country I fitted Excel trend lines to both the production and consumption curves, using the type of trending that either had the best r-squared fit or appeared to track the more recent data the best. The bit of eyeballing was necessary for cases like Iraq and Russia, where there were significant variations in the data due to known above-ground events. The trend lines I used were generally linear, exponential or second-order polynomials.

I extended each trend line out to 2020. This meant that I was projecting out 11 years, based on 19 years of history, giving a glimpse into what I think is going to be a very significant period in world oil production.

I then summed the production and consumption numbers of the exporters and the importers today and in 2020. This gave me the current market balance and the projected balance in 2020.

Results

Exporters

There weren’t many surprises in this group for anyone who has been following the oil news. The big gainers were Nigeria, Angola and Kazakhstan, whose exports grew between 30% and 40%. Overall the group lost about 6.5% of their aggregate net exports by 2020, dropping from 1.8 billion tonnes per year to 1.68 billion tonnes. In the process, both Mexico and Norway dropped out altogether, becoming net importers in the second half of the decade. The other big loser was Venezuela, whose net exports fell by 85%.

Importers

Again, there weren’t many surprises. The big gainer in 2020 was China (no surprise at all), whose imports increased by 140%. Singapore and India followed with 50% increases. The counties showing the greatest percentage drop in imports were Italy (-50%) and Taiwan (-20%). The USA decreased its imports by 13%.

The Market in 2020

Over the decade from 2010 to 2020 the top 15 exporters decreased their exports by 120 million tonnes (6.5%), while the demand from the top 15 importers increased by 330 million tonnes (19%).

If the other 20% of the market stays approximately the same, this change will result in the market shifting from a 4% surplus to a 14% deficit – a swing of 18% over the next decade. This is worse than the 11% deficit we saw in 1983.

Comment

The fact that world oil production has been on a plateau for the last 5 or 6 years even during the price spike hints that we are at Peak Oil. Net exports have been dropping in the last three years. This analysis has confirmed my belief that we are on the brink of an ongoing decline in the world oil market. We should expect higher prices – with both structural and speculative causes – which will present the global economy with some serious challenges over the next decade.