The Oil Drum

84 comments on The Megaproject update

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LevinK on April 5, 2006 - 12:50pm

Virtually all oil-exporting countries subsidise oil usage for internal consumption. The exceptions I can think of are UK and Norway and these are expected soon to turn to oil-importers themselves.

I don't see reasons this practice not to continue with rising of oil prices - quite the opposite actually. Of course there will be some pressure on domestic consuption but it will be nowhere near the pressure on oil exports.

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diderot on April 5, 2006 - 1:35pm

In fact, the subsidy the oil exporters give to their domestic consumers grows bigger with any increase in the international oil price.
So paradoxically, the internal absortion (consumption) rate will increase over time, as this subsidy makes their internal economies grow more energy-intensive. And as the difference between internal oil prices and international market prices grows bigger a growing chunk of oil is smuggled abroad for the profit of neighbours and smugglers.
So this factors add.. to a bigger, and increasing,(that is second derivative positive) growth in oil consumption in the producer countries.