134 comments on POLL: Credit crunch, new IEA production high (but what about the net?), lower world exports? Whither Oil Prices?
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Well, everybody can't do that at the same time. Ok, tourism is an axception here.
If everybody cuts discretionary spending to buy fuel and fuel production drops, it's price will just rise until somebody can't afford it.
A net exporter reminder. Our middle case shows that the remaining post-2005 net exports from the top five net exporters will be on the order of 100 Gb of total liquids, versus 2005 net exports of about 8 Gb. Net export decline rates tend to accelerate with time, and I expect that the 2007 top five net export decline rate will be sharper than the 2006 net export decline rate.
IMO, this is the key difference between the early stages of this recession/depression and prior events. One of the benefits of a recession is lower prices across the board. Who knows where oil prices are headed, but in relative terms--especially given the export situations--I think that they will be extremely high.
Jeffrey,
if you don't have time to finish off the entire article on the ELM how about posting a simple table of net oil exports for your middle case for the next 10-15 years?
In addition I was wondering if you had any thoughts on what might happen as these exporters begin to realize their upcoming negative predicament -and that it is closer than they think- as there is a 'rolling cascade' of countries going from Exporters to Importers. Personally I would expect a frantic investment in substitutes: solar thermal arrays, the nuclear option, in-country downstream oil product production and yes even taxes and allowing some demand destruction to bite... I.e. as awareness grows consumption declines somewhat.
Nick.
Our middle case shows a 50% net export decline by the top five by 2015. Or, our middle case shows that it would take 100% of the total 2015 net exports from Saudi Arabia, Russia, Norway, Iran and the UAE to meet current US net imports.
The EIA data show a -3.3%/year top five net export decline rate for 2006. Based on year to date data and assuming the same rate of increase in consumption in 2007 as 2006, I estimate that the 2007 top five net export decline rate will be about -5%/year, in other words an accelerating net export decline rate, which is what our model and recent case histories show.
Some analysts and the media are gradually beginning to catch on to the ELM, but they are primarily focused on the consumption side, without paying attention to the possibility of lower production combined with increasing consumption, which results in the accelerating net export decline rate.
Shouldn't be using UAE there. Kuwait is the 5th largest exporter. Shouldn't effect the numbers much. Doesn't matter. 5 through 8 are virtually identical with their production and exports controlled by how messed up and corrupt their leaders are at any given time. The split between 1st and 2nd rate exporters comes after Angola.
http://www.eia.doe.gov/emeu/cabs/topworldtables1_2.htm
If I understand you correctly a 50% decline by 2015 would be an absolute disaster... no?
I'm trying to get my head round this as I don't know what % of the total production amount (85 mbpd?) will see this 50% deduction. As an example if we produce 85mbpd and -say- 55mpd of that is 'Net exports' you are saying by 2015 we would be down to 27.5mbd of Net or the equivalent of NOW producing (85-55) + 27.5 = 57.5mbpd
I would guess at this NET decline rate that things are going to be looking pretty grim in just 2 or 3 years no? (I mean 50% decline is 7%+ a year, although I think you said it accelates over time. Whats your extimated decline %for 2007, 8, 9 and 10?)
Nick.
Total world net oil exports (total liquids) were around 47 mbpd in 2005, and the top five accounted for about half of that, about 23.6 mbpd in 2005.
I estimate that the top five 2007 number will be around 21.6 mbpd, which would be an accelerating decline rate (-3.3%/year for 2006, estimated at -5%/year for 2007), which is what our model and recent case histories suggest.
We are forecasting that this slide in net exports by the top five (and by many smaller exporters too) will continue, and our middle case is that the current top five will be down to about 12 mbpd by 2015.
Net exports is falling both as a result of falling production as well as rising consumption.
If a country produces 100 oil and consumes 80, a 10% increase in consumption will lead to a drop in export of 40% with constant production.
If production falls 10% in the same period exports will have fallen 90%.
The bad news is that in the oilproducing countries people dont have to pay full price which reduces the demand destruction in these countries.
In the ongoing auction for oil we must remember that a large part of the oil is not sold at full price.
Personally I just hope that the danish government will lower the tax on oil with rising prices.
When oil sells for 150$ they could easily lower the tax on petrol to make end users price paid pretty much the same and still get the same revenue.
I guess I am dreaming, but it would be a nice way to protect end users.
If they just decide that petrol should cost 10 DKK/litre this january and rise 1% each month they would be well of.
Rune