The Grand Delusion – Sept. 9th, 2014
The Grand Delusion – Sept. 9th, 2014
This is the best I could do showing trends in oil consumption over the last decade. It is fairly simple, I hope, to understand demand and where it comes from by looking at these numbers. I started with the spreadsheet of oil consumption from BP’s Statistical Review of World Energy 2014.
I sorted the list from the greatest increase in barrels per day from 2003 to 2013. So the countries at the bottom of the list in yellow are all using much less oil then they were 10 years ago. Uzbekistan is the only country in this group that is neither European nor industrialized. Or maybe it is. I know very little about Uzbekistan.
At the top of the list, I separated major oil producers/exporters from the field and color-coded them blue. These countries will not be drawing oil from the rest of the world anytime soon.
I compressed about 30 countries and regions in the middle of the list into “All Other Countries.”
This leaves us with only China and India as significant individual contributors to demand growth. Brazil is the only strange case. It basically is right on the cusp every year of being either a net exporter or importer. They apparently swap some of their heavy crude for sweet crude from West Africa because of their overall refinery setups. I arbitrarily left it in with China and India.
So we have the most dynamic, westernized, industrialized countries reducing their demand through recession, technology and efficiciency. Their wages and disposable income have flat-lined so basically they can’t afford $100 oil and are coping with that. Growth has and will continue to suffer in these countries with $100+ oil, but they are adapting.
Next we have a bunch of basically overpopulated, Middle-Eastern, Gulf-States rolling with dollars and giving gas away free to their huge, young, unemployed populations. Saudi Arabia uses 1.5 million barrels per day just to desalinate water. Who knows how long this party will last.
But of the remaining countries, China and India have increased demand more than all the others combined. They have been building roads, buying cars, and clearly buying gas in a decade that coincided with the price of oil quadrupling. Their economies continue to grow at a record pace, and it is the rising incomes that allow them to outbid Americans for the juice. China also reported only uses 20 percent of its oil for transportation. It is mostly to fill in gaps in electricity production. Scary.
The key here, in my opinion, is that production doesn’t really matter as much as both exports and who is going to be buying those exports. Brazil is always looked to for future “deepwater, unconventional oil production” expansion, but if their domestic consumption is going to be rising just as fast, it is irrelevant to anyone’s geo-economic strategic outlook. Similarly, the reality is that North America could potentially be energy independent. I would have thought this far-fetched 3 years ago, but I have to admit I’ve become more optimistic about this for several reasons I’ll get into later.
Currently we only get 2 million barrels per day from the Persian Gulf (1.4 mbpd from Saudi) and another 2.5 mbpd or so from North and West Africa, Columbia, Venezuela, and Russia. Why are we so committed to the Middle East with not just the US Navy but our entire defense structure when 18 out of 20 million barrels per day of exports from the region go mainly to East Asia and partially to Europe? Think about it.
Why do we let Israel and Saudi Arabia call all the shots?
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Sleeping With the Devil (2004)