61 comments on Oilwatch Monthly February 2009
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61 comments on Oilwatch Monthly February 2009
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Forbin
Maybe WT will correct me but I think the underlying tenet behind the ELM is that oil wealth (ie the ability to export) is so fundamental to economies that this wealth is invariably shared with populace of the country, so they consume more especially as the 'cost' of the oil does not directly affect their balance of payments (is is an off cashflow item) . Much as a farmer will tend to consume some of their own produce.
I like you wonder if it the ELM takes into account the dominance of Oil in state revenues, ie will Mexico or Russia be able to follow the same pattern as their tax revenue is so linked to oil. This was certainly a problem in totalitarian states (Like Romania during Communism when they exported ALL their sunflower oil leaving none for the citizens)
The other factor to consider is not all internal consumption of an "export land" is personal use (we do tend to equate oil consumption with cars), KSA building an Aluminium Smelter, Desalination works, Chemical Plant etc, all consume oil but the 'value added' factor enhances the nation state revenue. Maybe the two uses (productive & lifestyle) compensate due to external correctors.
Neven
I really only proposed the ELM as a simple mathematical model to help me understand how fast net exports would decline given a single digit exponential decline rate and a single digit rate of increase in consumption. I was, and I remain, shocked at how fast net exports decline.
Given the fact that two countries with vastly different rates of increase in consumption--the UK and Indonesia--showed declines similar to the ELM suggests to me that most post-peak exporters are going to show similar declines. In the case of Indonesia, all of their net exports were shipped at average annual oil prices of less than $40.
And of course, if the rate of increase in consumption is high enough, net exports can go to zero, long before the exporting country's production peaks, e.g., the US.
Neven,
You make a good comment in your last paragraph. Why ship the oil some place else to make products? Why not create the industries that consume the raw material which will create jobs for your population and increase your GDP. It is a win win...
Don
Its the not in the interests of the US or other oil consuming nations that these energy-banana republics ever develop this capability. If they can themselves create the things we currently trade for their oil what would we trade, more packaged dodgy debt perhaps?
Nick.