The Oil Drum

Regarding the rapid growth in GDP since 2000, you might want to compare it to the net oil export chart shown above. I agree with you that Russia has a much better tax system.

If oil production continues to decline, I agree that importers will be hit much harder than exporters. Russia, IMO, is in what I call a Phase One decline--where cash sales from declining oil export volumes increase, because of rising oil prices.

Using the production data through 1984 to construct a HL model suggests that Russia--at least from mature producing basins--is roughly at the same stage of depletion as the Lower 48, in the vicinity of 85% or so. Cumulative Russian production has recently "caught up" to where it should, based on the HL model. Excluding the Sakhalin-1 Field (which was not producing in the Eighties), daily crude output in Russia has been down year-on-year since May, 2007 and very recent data show declining total production.

My premise is that frontier Russian basins are to mature Russian basins as Alaska is to the Lower 48--it helps, but it's no panacea.

Oil exports are a curse for the exporting country - in this case Russia. It raises the value of their currency and makes domestic industries uncompetitive.

Hello Dissident,

See my posting downthread--Do you have any news on why Gazprom is raising sulphur prices 7-fold, or is this a journalistic mistake?

TODer Samsara had a good point the other day that there are huge stockpiles globally from the oilsands, sour crude and gas, coal scrubbers, etc. This should make sulphur products dirt cheap, but prices are rising rapidly--why isn't this stuff moving through the supply chain on a timely basis to where it can be used? Thxs for any reply from you or other TODers.

Bravo! Russia's economy is going strong because of the wonderful flat tax program, mostly. How is the economy in Venezuela, Saudi Arabia and Iran?

I don't think dwindling Russian oil production will necessarily have any special effect on Russia, beyond the broader overall effect shared by everyone. The US didn't suffer any particular problem resulting from going from a net exporter to a net importer. Not that Russia will be a net importer anytime soon, mind you. There are a lot of countries that are heavy importers, due to the lack of domestic resources, and obviously someone must export to them. Russia is a likely candidate for some time. Already there is some effort to normalize fuel prices in Russia, to reduce overconsumption. In the end, probably everyone will reduce their consumption somewhat, and Russia will continue to export to western Europe.

There is a popular myth or metaphor here at TOD, which is that the economy is like some sort of machine that runs on fossil fuels, and without fossil fuels the machine stops working. Actually, and "economy" is just what people do all day. It doesn't judge between one thing or another.

With a little imagination, it is easy to think of an abundant, prosperous economy that uses perhaps 20% of today's total energy use. Instead of an economy (what people do all day) with a heavy focus on driving 6000 lb SUVs, and all the associated roadways and parking lots, and gigantic houses and excessive consumer goods, you could have an economy focused on something else.

For example, you could have a teahouse economy. Japanese history has funny periods in which the elite classes got very serous about tea, and their teahouses. They would spend ridiculous sums on tea and teahouses. OF course this was just a silly game among the aristocrats. But, I'm not sure that expending one's economic effort on exquisite teahouses is any different than expending one's effort on personal automobiles and giant suburban houses, and all the other stuff such as buying about 10x more clothing than one can possibly wear out, along with all the other home furnishings. Both are really just a matter of aesthetics. For whatever reason, people today prefer the aesthetics of cars and suburban houses and constant shopping for generally mass-produced low-quality goods (compared to handmade artisan pieces) to the aesthetics of teahouses. Thus, the economy today is organized to create enormous quantities of cars and suburban houses and mass-produced low-quality goods. However, you could have an economy organized to create exquisite teahouses.

In a teahouse economy, there might be a very large teahouse industry. Many, many people would be involved in the design and construction of exquisite teahouses. This does not necessarily mean a large number of teahouses. You can just as easily put effort into making very expensive and labor-intensive teahouses. There are some teahouses in Japan that are completely covered in gold leaf, for example. And, since each one would be completely original and artisan-built, they would be very expensive.

There is no distinction, in economics, between building one gold-leaf covered teahouse for $10m or building 10,000 plastic Home Depot teahouses for $1000 each. Both are perfectly valid ways to spend one's time. Indeed, it could well be argued that it makes more sense to build one $10m teahouse, as that could be a work of art appreciated for centuries, while the 10,000 plastic Home Depot teahouses are really just a bunch of disposable junk.

I'll stop there, but we can see from this example that, perhaps, making one $10m teahouse, by hand, could be much less energy-intensive than making 10,000 plastic Home Depot teahouses in a factory in China. Also, it would be much less energy intensive than buying 200 $25,000 SUVs (for $5m) and then burning up $5m of petroleum driving around the countryside. And yet, all three options are counted as "$10m of GDP" by statisticians. (Not that statistics are the last word on anything, but you see the point.)

Which is not to say that there will not be a "collapse of civilization as we know it" corresponding to the period of declining fossil fuel production. However, you don't need declining fossil fuel production to have an economic collapse. The Soviet Union collapsed just fine despite sitting on huge quantities of fossil fuels.