The impact of declining oil exports
Each year a dwindling global pool of exports has been generating ever greater competition among importing nations and has become a largely unheralded force behind record high oil prices, Cobb writes.
(Page 2 of 3)
Brown focuses on a key number which he calls cumulative net exports (CNE). It's the total expected volume of exports from oil-exporting countries over the entire period from now until global exports are presumed to drop to zero around 2060. It's based on the trajectory established in the data from 2005 through 2011. Though the timetable is likely to change, when he looks at CNE alongside the current rate of decline for exports, it's clear that the world's remaining exports are "front-loaded." The largest portion will be delivered in the years immediately following the export peak. It's why "we've experienced something close to business as usual" since the apparent export peak in 2006, he said.
Kurt Cobb is the author of the peak-oil-themed thriller, 'Prelude,' and a columnist for the Paris-based science news site Scitizen. He is a founding member of the Association for the Study of Peak Oil and Gas—USA, and he serves on the board of the Arthur Morgan Institute for Community Solutions. For more of his Resource Insights posts, click here.
Subscribe Today to the Monitor
In analyzing the production and export history of former oil-exporting countries, Brown has discovered a disconcerting pattern. "A rough, but fairly consistent rule of thumb is that [after an exporting country's oil production peaks] half of post-peak CNE tend to be shipped about one-third of the way into the net export decline period, which suggests that post-2005 global CNE would be about half gone around the year 2024," he explained. Think about this for a minute. Brown forecasts that half of all the oil exports that will ever be shipped from now on will have been shipped by 2024. That tells him that the economic pain associated with the loss of global exports is likely to become very acute in the not-too-distant future.
If this happens, the world will be forced to adjust. But that adjustment is likely to be rather wrenching for some. Already, consumers in the United States, for instance, have actually partly accommodated rising demand in Asia by reducing U.S. consumption of oil products from 20.8 mbpd in 2005 to 18.8 mbpd in 2011. But the cutback has been largely a matter of necessity for those who have lost jobs or experienced wage cuts and for businesses which are struggling in a weak economy.
As Brown began to think about the export issue back in 2006, he made two observations which seem obvious once you hear them: First, if the economy of an oil-exporting country grows, that country typically will use more oil to support that growth. Second, once total production peaks and starts to decline in an oil-exporting country, exports almost always decline much faster than total production. This is because exports are typically being squeezed from two sides. Production is falling making less oil available for exports, and consumption is rising with the same effect. (Declining net exports can also occur if domestic consumption is rising faster than production which is what happened in the United States, causing the country to become a net importer for the first time way back in 1948.)
The two observations above led Brown to develop what he dubbed the Export Land Model. It was a simple model that seemed to explain a lot. Here's how he set up his first case: Brown assumed that a hypothetical oil exporter--which he designated as Export Land--had reached its peak in oil production. He assumed that domestic users in Export Land consumed half of all the oil the country produced. He then assumed a 5 percent annual decline in the rate of oil production and a 2.5 percent annual increase in domestic consumption. The results astonished and troubled him. In just nine years oil exports from Export Land went to zero.