If you aren't familiar with the Export Land Model for oil, you should be - I've posted about Jeffrey Brown's incredibly important work many times in the past, but it is still common for even people who otherwise grasp the basic points of peak oil to not thoroughly understand that internal consumption dramatically affects potential decline rates.
In the simplest terms, oil exporting nations are also nations with oil money coming in and that creates economic growth and modernization that encourages domestic oil consumption. The more oil consumed internally, the less that gets exported. When nations reach their peak (and all oil producing nations eventually peak, and in fact, a majority of major oil exporters have already done so), and begins to decline, the people who live in that country don't necessarily say "oh, we shouldn't use oil anymore because people in other countries want it." This was manifestly true of the US during the years when the US was a net oil exporter - instead, our per capita oil consumption continued to rise, and as the US moved down the peak further, we stopped being a net exporter. What is important about this is that where the material limits of production often give decline rates of 2-5% or so year over year (problematic enough in a society where oil prices turn on tiny fluctuations), net export affected decline rates are much more dramatic - consider this case study of Indonesia and the UK, two very different countries with shockingly similar net decline rates.
As important as internal consumption is to the overall availability of oil, people have been slow to grasp this. Now a firm in Britain has trumpeted the alarm - the Saudis are using too much of the oil under their land, and should stop, because it could cause a world oil crisis. Wow, I'm sure that will stop internal oil consumption.
The report, posted on the Chatham House website Wednesday, said without significant policy changes, rising Saudi energy consumption could deprive the world of 2 million barrels a day of oil exports by 2020 and make major oil price spikes more likely.
It urged the Saudi authorities to curb demand growth with some urgency by increasing domestic fuel prices and pushing for greater efficiency.
"Saudi Arabia's energy consumption pattern is unsustainable," said the report. "Demand for its own oil and gas is growing at around 7% a year. At this rate of growth, national consumption will have doubled in a decade."
According to the Joint Organizations Data Initiative, which publishes official oil production figures from participating countries, Saudi Arabia produced 9.4 million barrels a day of oil in October and consumed 2.0 million barrels a day.
Since neither Britain, the US nor any other nation has ever curbed consumption based on their declining net exports, this can only be seen as humorous. The Saudis claim to be able to increase production, but as the article notes there are compelling reasons why this is probably not the case - and we know that during record high oil prices in 2007, the Saudi's announced a "voluntary" cap on production - essentially saying unconvincingly "Well, we can pump all the oil we want, we just don't want to right now because we don't want the money."
It is extremely unlikely that anything other than a massive global recession could cut domestic consumption in Saudi Arabia, and maybe not even then. Instead, we will have to come to terms with the fact that it just isn't our oil under their sands.
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And I thought you linked to an Onion article. Silly me!
A British company is saying that Saudi Arabia's energy consumption pattern is unsustainable? Man, that's the funniest thing I've seen all week...
What does it say that I couldn't stop chuckling as I read the quoted txt? Oh I know - it says I am still able to laugh at the absurd.
Great post; really well explained.
And it's probably worse than that. The royals will have to maintain and improve social benefits, many of which carry additional energy burdens, in order to maintain control in the face of increasing populist pressures. So, it is entirely possible that their use will not just increase, but that the rate of increase will also increase.
Export Land combined with Arab Spring does not paint an encouraging long-term export trend for the KSA.
You're right Sharon, that think tank release is pretty funny. 'Kind of sounds a bit desperate too.
One thing that has been increasingly true about US oil trading as of late is that the US has been exporting more finished oil products such as gasoline and diesel fuel. I have increasingly seen some calls on some conservative web sites, pointing out this fact along with calls that if we'd only keep more of these finished products from being exported, gasoline and diesel prices wouldn't be so high in the US.
I think it is kind of funny that we import so much crude oil and then export so much of the refined product. I think some of what is going on here is that not only crude, but finished products flow to the areas that can best pay for it, and increasingly, its the developing nations such as China that are willing to pay, while we in the US, haven't grown our consumption of oil products nearly as much in the past 5 to 10 years. Of course, this is probably a *good* thing for us in the US, though Conservative protectionists probably don't see it this way right now.
I think another thing that's going on is that the world's supply of remaining crude production is getting more "sour" and heavy every year, and its the relatively high level of technological sophistication of US oil refineries that can best crack and handle this heavier crude - to a point any how. The market recognizes this fact and the crude and refined products are flowing accordingly.
I think it's also funny that so many anti-enviromentalist conservatives have been howling for years that the US has been closing oil refineries and yet now we seem to have excess capacity to sell abroad. (In reality, though we have been closing refineries, we've been upgrading other refineries. That is, while the number of US oil refineries has dropped over the years, the total refining capacity hasn't dropped by nearly as much. I recall seeing numbers somewhere a few years back showing that refining capacity was actually flat to a bit up.)
I think that we've seen some crude oil supply increases (or at least a slowed decrease) from Canadian tar sand and other Canadian oil supplies along with increased production from the Bakken formation in the Montana/Dakota region.) Given that US oil product consumption is flat to down, it's only logical that since the combined US and Canadian oil production has slowed its decrease for a bit, as of late, that the now "extra" refined products from that oil would flow to overseas markets - markets where many people are buying their first car, etc.
I think if the Keystone oil pipeline were ever built from Canada, we'd see this market situation develop further. That is, many people might be surprised to see that Canadian oil, get refined and then flow onto other countries rather than stay in the US for US uses. People that think the Keystone would inordinately help US oil consumers are fairly well mistaken.
Oil and oil products are a fungible market which of course means that those products will flow to the highest bidder, more or less ("more or less" being a fudge factor owing to imposed tariffs and other political, situational realities.)
I don't see any of this as anything but a rather temporary, partial, market adjustment to current world crude and refined product market realities. Still, there are many ideologues out there that will at times rejoice or panic over the various market oddities that are accompanying the world as said world experiences life at the top of the Peak and the start of the backside downfall.
Isn't that rich?
When I was in Venezuela late 1980s the talk was at some near term future, Venezuela's need for oil would use up all their domestic production. I think Chavez has saved them from that in the near term.
This particular Brit would like to apologise for the stupidity and short-sightedness of some (many?!) of our countrymen. Unfortunately far too many people (especially in London) still think and act as if Britain was still the global power it was a century ago. I feel we are going to be brusquely disabused of this notion pretty soon.
Well, we don't have to look very far to find examples of nations severely limiting internal food consumption for the sake of the export market...
@Calum - I'm glad I'm not the only one who feels the need to apologize; except I'm apologizing for America. Living in the UK and constantly being asked questions about American political shenanigans (if I get asked about Sarah Palin again. I. Will. Just. Scream.) and such, often with raised brows, I'm getting to the point where I want to affect a Canadian accent and not admit my citizenry (being from Alaska, this almost would work). As global powers go, we're following in the footsteps of our British cousins. You'd think we'd know better by now.
@Kerri - I would posit that decline after resource production/consumption is the norm for human civilization. We have the ability to be better stewards - but not the will...