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THE COMING MIDDLE EAST OIL CRISIS: The Collapse Of Net Oil Exports
THE COMING MIDDLE EAST OIL CRISIS: The Collapse Of Net Oil Exports
The Middle East is heading for a crisis in its oil industry. Unfortunately, the market doesn’t realize there is any danger on the horizon because it mainly focuses on how much oil the Middle East is producing rather than its exports. You see, it doesn’t really matter how much oil a country produces but rather the amount of its net oil exports.
A perfect example of this is Mexico. As I mentioned in a recent article, NEXT OIL DOMINO TO FALL? Mexico Becomes A Net Oil Importer, Mexico is now a net importer of oil for the first time in more than 50 years. Furthermore, the IEA – International Energy Agency, published in their newest OMR Report that Mexico is forecasted to lose another 170,000 barrels per day of oil production in 2019. Thus, this is terrible news for the United States southern neighbor as it will have to import even more oil to satisfy its domestic consumption.
Now, when we think of the Middle East, we are mostly concerned with its oil production. However, the Middle Eastern countries, just like Mexico, have been increasing their domestic consumption, quite considerably, over the past 40+ years. How much… well, let’s take a look. Since 2000, total Middle East domestic oil consumption jumped from 5.1 million barrels per day (mbd) to 9.3 mbd in 2017:
As we can see, while Middle East oil production increased by 7.9 mbd from 2000 to 2017, domestic consumption expanded by 4.2 mbd. This means that more than 50% of the Middle East’s production growth during this period was absorbed by domestic use. The next chart shows how the changes in the regions oil production and consumption impacted net oil exports.
…click on the above link to read the rest of the article…
Jeffrey Brown: To Understand The Oil Story, You Need To Understand Exports
Jeffrey Brown: To Understand The Oil Story, You Need To Understand Exports
Despite the attention-grabbing economic volatility that is grabbing headlines, it’s important to keep our eye on the energy story firmly in focus. This is especially true as the headlines we regularly read about Peak Oil being dead ” are “manifestly false” according to this week’s podcast guest, petroleum geologist Jeffrey Brown.
As concerning as the fact that global oil production has plateaued over the past decade, despite trillions invested in trying to goose it higher, are Brown’s forecasting model for oil exports. His Export Land Model shows how rising internal consumption can swing (and has swung) countries from major exporters to permanent importers within a dizzyingly short period of time:
The crucial issue to understand about what has happened after 2005 is that we’ve had a very large increase in global gas production and natural gas liquids, but a much slower increase in crude plus condensate. So, what I think has happened is the actual crude oil production has basically flatlined while the liquids associated with natural gas production, condensate and natural gas liquids, have continued to increase. So, we ask for the price of oil, we get the price of Brent or WTI; but when you ask for the volume of oil, you get some combination of crude, condensate, natural gas liquids, biofuels. So, the fact is that substitution has worked and is working in that they’re bringing on alternative substitutes, but they’re only partial substitutes. The actual, physical volume of crude oil production has probably been flat to down since 2005. Over the past ten years, it has taken us trillions of dollars, basically, to keep us on an undulating plateau in actual crude oil production. What happens going forward?
