Part 5 Predicting regional petroleum consumption in a post-export world

In part 2 and part 3 of this series, I presented my regional analysis of global production and consumption trends for the Middle East (ME), Former Soviet Union (FS), Africa (AF), South America (SA), Asia-Pacific (AP), Europe (EU) and North America (NA).  In part 4, I put the regional analysis together to show that net-exports from the four exporting regions (ME, FS. AF, SA), will end in about 2030-2035. Here in part 5, I apply the same data to predict what petroleum consumption rates will look like for each of these regions as the global net-export pool declines to zero. 

But first, here’s the “tweet” version of my analysis:

Consumption drops worldwide with total collapse in EU & AF, & near collapse in AP. 

SA and FS are better off, with NA & ME even better.   

For those few remaining, it may have become apparent to you by now that something has got to give between the predicted future consumption trends and the future export trends for these seven regions.

Except for EU, whose consumption rate appeared to have peaked in 2006, the other major importers AP and NA, and even the exporters, except for ME, are all on trends for consumption rates to increase and peak sometime in the next five years.   Peak consumption for the two biggest importers, AP and NA, are both predicted to occur in 2013.  Peak consumption is also predicted for AF in 2013 and for FS in 2014.  Finally, the ME is predicted to reach peak consumption in about 2028. 

Consistent with these trends, there is a predicted peak in demand for petroleum imports for the three major importing regions in the mid 2010s to early 2020s: 2015 for AP (-6.9 bbs/yr), 2021 for EU (-5.1 bbs/yr) and 2022 for NA (-4.5 bbs/yr). 

Over this same time span, however, as illustrated in Figure 8 (in part 4), we see the trend for the sum of exports from ME, FS, AF and SA to be in steep decline and to reach zero by 2030-35 depending on the assumptions made. 

When it comes to a struggle between declining exports versus increasing import demand, I'm putting my money on declining exports—that is, I don't believe these projected trends for consumption rate increases over the next five year, will be reached in view of declining global export trend presented in Part 4.  The imports must decline, and of course, declining consumption rates will follow. 

My analysis of the production and export trends allows me to estimate future consumption rates for the seven regions.  Let’s see what those declining consumption rates will look like in that critical period from 2010 to 2035 when net exports are predicted to end, and, in the post-export period thereafter.

Predicting future global petroleum consumption trends—methodological considerations

To make these predictions, I assumed that the present proportions of imports going to AP, EU and NA will all stay the same as they have been over the part 5 years.  I further compare the assumptions of the "sharing" or "no sharing" as applied in Part 4, to AF and SA, who become ex-exporters after 2018.

To estimate the relative proportions of imports going to these three regions, I looked at the reported net imports for AP, EU and NA for the past five years, calculated the percentages for each of these regions, and then determined averages (± sd) as summarized in Table 8 below:

Table 8 proportion of imports going to AP, EU and NA
	Average Imports 2005-2009 (bbs/yr)	Average Percent Imports
AP	6.3 ± 0.2	44.0 ± 1.7
EU	4.0 ± 0.1	28.4 ± 0.4
NA	4.0 ± 0.3	27.6 ± 1.9
SUM	14.3 ± 0.3	100

The very attentive reader might notice that the average total imports to these three regions looks to be about 1.3 bbs/yr larger than the pool of global net exports from ME, AF, FS and SA, which is about 13 bbs/yr over this same period (Figure 8), and, you would be right. 

This gives me another opportunity to rant about the BP data base.  For the last 30 years, the BP data base has reported a total world petroleum production rate that is always lower by about 1-1.5 bbs/yr than the reported total consumption rate.  I can't find any explanation for this discrepancy in the BP data base itself.  Because of the consistency of reported production always being lower than reported consumption this doesn't look like a random statistical aberration or rounding error.  The last year where the reported production was greater than reported consumption was 1980. Then, from 1980 back to 1965, reported production rate is always greater than the reported consumption rate.  Perhaps in 1981 BP changed in the way the data were collected or estimated, I don't know.

Although I have no explanation for this trend, I think my approach of working with proportions, as done in Table 8, helps to mitigate this apparent anomaly.

The attentive reader might also wonder about whether it is appropriate to estimate the average proportions from the last five years only.  This is a judgment on my part, based on the recent trend of the changes in these proportion, as summarized in Figure 10 below.

In the 1960-80s, there was a long-term downward trend for the proportion of EU's imports to decrease, but this trend has flatten out over the last decade.  This is probably due to declining intra-regional production from the north sea producers Norway, UK and Demark.  There is also a long-term upward trend for the proportion of NA's imports to increase, but this has also flattened out over past several years.  The trend of AP's proportion of imports to increase is still quite strong.  However, if the proportions going to EU and NA are in flat, and exports from ME, AF, FS and SA are flat or going down, then the upward trend for AP will likely also have to flatten out.  My compromise was to use the average proportions going to these regions over the past five years.

Alright, with this background out of the way, let's consider the predicted consumption trends for the seven different regions.

Asia-Pacific 

Going forwards, if AP continues to import 44 % of the diminishing global export pool, then its consumption will be limited to the sum of this proportion of available exports plus AP’s own regional production, shown in Figure 3 of Part 2.  The available export pool changes somewhat after 2018 as AF and SA become ex-exporters, depending whether or not we assume the "sharing" or "no sharing" scenario applies to these regions.  As I explained before I expect something in between no sharing and total sharing to occur.

Figure 11 shows the reported consumption rate and predicted consumption rates for either scenario (solid line and dashed lines). 

I believe that the sharp ~1 bbs/yr drop between the reported production in 2009 and the predicted consumption in 2010 is due to above-mentioned systematic discrepancy in the BP data base between total production and total consumption—this gets propagated through the calculations of total exports from the ME, AF, FS and SA regions.  It is most prominent for AP, because AP imports the largest proportion of its total petroleum consumption needs of all seven regions.  For instance, in 2009 AP only produced 30% of the petroleum it consumed (2.9 bbs/yr produced and 9.5 bbs/yr consumed); the remaining 70% came from outside of AP.

If these trends continue, then as illustrated in Figure 11, consumption will strongly decline.  The consumption declime will have to follow the declining trend in global net-exports, until zero net exports is reached in 2030, or, 2035, depending on the "sharing" or "no sharing" assumption made.  At that point, consumption becomes limited by the region's own internal consumption ("intra-regional consumption"). 

As Figure 11 illustrates, the impact of the "sharing" versus "no sharing" assumption is relatively minor.  Either way, we have consumption declining from about 8.5 bbs/yr (2010) to less than 2 bbs/yr in 2030-2035—an 80% decrease!  This dramatic decline in consumption simply reflects the fact that AP is highly dependent on global oil imports from outside of the region and the fact that its intra-regional production (Figure 3 in Part 2; reproduced in Figure 11 as the dash blue line) is comparatively low.

North America

Applying the same assumptions in the same way as described above for AP, we arrive at the predicted consumption curve shown in Figure 12. 

According to the BP data set, in 2009,  NA produced  4.9 bbs/yr of the 8.3 bbs/yr it consumed—that’s 59% percent.  This means that the remaining 41% of NA’s consumption was from the global export pool. Once global exports end in 2030-35 NA’s consumption would be limited to its intra-regional production, represented as the dashed blue line in the figure (reproduced from Figure 7 in part 3).  The predicted consumption rate in 2030 (3.6 bbs/yr) is 43% of present consumption—a 57 % drop.  That’s bad, but not as bad as the 80% drop in consumption for AP.  The reason why the drop is not as bad is because NA’s intra-regional production is larger than AP, and its present consumption rate is smaller than AP's—so basically there is a shorter distance to fall.  That’s about as optimistic as I can get in this analysis. 

Europe

Again I apply the same assumptions as described above for AP and NA to arrive at the predicted consumption rate curve shown in Figure 12. 

My first reaction when I generated the data for this plot was, “bloody hell, Europe is hosed!” 

My reaction is still the same every time I look at this figure. 

The 80% and 57% decline in consumption for AP and NA may look harsh, but a 100% decline?  Things are far worse for EU because, like AP, EU is heavily dependent on global exports, but, when global exports end in 2030-35, EU’s intra-regional production is already done.  There is no intra-regional production to fall back on.

In 2009, EU produced 1.6 bbs/yr of its 5.6 bbs/yr consumed—that's only about 28% of its total consumption.  The other 72% comes from imports.  Intra-regional production is in rapid decline, however, so by 2030 EU’s intra-regional production is predicted to be less than 0.1 bbs/yr.  If EU continued to import about 28% of the global export pool, and, that export pool goes to zero by 2030-2035, well, then consumption will collapse from the present consumption rate of 5.6 bbs/yr to less than 0.1 bbs/yr.  That is a very long hard fall in a relatively short period of time.

One short term solution to delay this collapse would be to import a higher proportion of the global export pool.  But which of its import competitors will be willing to give up more of the oil they import—AP or NA?  Both of these regions will also be suffering their own harsh declining consumption rates due to the declining global export pool plus declining intra-regional production.  The global import market for oil will be very competitive, and I can’t imagine what prices will go up to, before governments step in and impose rationing. Still where will the EU get its oil from?
  

Another short term solution is to “convince” the exporters ME, FS, AF or SA to cut their own domestic consumption so that EU can import more.  Hey, maybe we can call it a democracy movement and replace the current despot with another friendlier despot that is more willing to sacrifice the domestic oil consumption of its people—no, no, that sound too ridiculous, no one would think that would work, would they? 

Okay, lets move on and see what the four exporter’s consumption rates may look like going forward.

Africa

As an exporter, AF's consumption rate trend can continue until it hits zero net exports; then it will rely on its internal production, plus any amounts it can import from ME and FS until 2030-2035 when net exports from ME and FS end.  Thereafter AF, like any other importer region must rely on its own production.

Figure 14 shows the two sharing and no sharing scenarios.

My initial reaction to this was about the same as it was for EU—total collapse of consumption rates in AF is likely by 2030.

Because the production rate (dashed blue line) for AF is on a sharp downward trend, if there is no sharing from ME or FS in 2019, after AF hits zero net exports, then AF consumption rates will be in sharp decline and essentially reach zero (> 0.1 bbs/yr) by 2030.  If the total sharing scenario applied, then the collapse in consumption rates would be postponed by a dozen years, but then collapse occurs more sharply to less than 0.1 bbs/yr in 2030.  I am expecting the reality to be somewhere in between these two scenarios, but either way after 2018, there will be a sharp down turn in consumption from about 1 bbs/yr in 2018 to less than 0.1 bbs/yr.  This may be every bit as bad a collapse as predicted for EU although the distance fallen is not as far.  On the theory that "the shorter distance to fall the better," then perhaps AF will more easily adapt to a post-petroleum future than EU, for instance. 

AF's imminent collapsing production also suggests that a strategy by the EU that continues to rely on AF as a major supplier of its imported oil past 2018 is not a very good one. 

South America

Similar to AF, as present exporter, consumption rates in SA can continue on its current trend until 2018 when it also hits zero net exports.  Under the no sharing scenario, SA would have to rely on its internal production.  With the sharing scenario, the decline in consumption can be postponed for 12 years.  Figure 15 shows these two scenarios.

The downward trajectory in production is not as bad as for AF because SA still has significant intra-regional production after 2018 or even after 2030 (dashed blue line).  In fact, from present consumption levels of 2 bbs/yr, a fall to 1.6 bbs/yr by 2030 is only a 20% decline.  Not too bad in comparision to the other regions.

Under the "shorter distance to fall the better," theory, SA may be better shape than AP or NA, and certainly better off than EU.  The steepness and relative drop in consumption would be slightly worse if SA continued on its present consumption rate trend to 2.4 bbs/yr by 2030 and then drops down to an intra-regional production level of 1.5 bbs/yr in 2031—a 38% drop.

Overall, SA looks better positioned to tolerate the end of global exporter in 2030-35 because its present consumption rate is fairly low and it will continue to produce at almost the same level that is presently consuming.  Consumption will decline, but the decline is in a more gradual manner than seem for AP, NA, EU or AF. 

Former Soviet Union

Figure 16 shows the predicted consumption rate trend.  As an exporter, FS's consumption can continue until it hits zero net exports in 2033; then it must rely on its internal production.  Sharing or not sharing with ex-exporters like SA or AF after 2018 doesn’t change the consumption scenario for FS.  Rather, this just cuts into excess production (solid blue line compared to dashed blue line) that otherwise would have been exported to AP, EU or NA. 

FS’s fairly flat consumption trend could continue unabated until it reaches zero net exports in 2033.  Thereafter FS is on a fairly sharp consumption decline because by then, FS will be in the tail end of its production rate (blue dashed line).  By 2055, FS’s consumption would be less than 0.1 bbs/yr. 

Middle East

Figure 17 shows the predicted consumption trend.  Similar to FS, as an exporter, consumption can continue until ME reaches zero net exports in 2035 and then it must rely on its internal production.  As pointed out for FS sharing or not sharing with ex-exporters like SA or AF after 2018 doesn’t change ME’s consumption trend. 

After reaching zero net exports the downward trajectory in consumption is fairly sharp as ME is also on the tail end of it's production rate curve (dashed blue line).  But consumption doesn’t decline to less than 0.1 bbs/yr until 2080.

Summary

Europe and Africa are on track to have total collapses in petroleum consumption by 2030.  The trend is for Asia-Pacific to have a near total collapse with an 80% decline in consumption by 2030.  North America’s consumption will decline by 57% and South America’s consumption will decline by about 20%.  The former Soviet Union can continue it flat consumption rate trend until 2033 and the Middle East can continue its grow trend in consumption till 2035.

It might seem that the Middle East, Former Soviet Union or maybe South America, would be in the best positions to tolerate the end of the petroleum age, however, I would like to make the case for an alternative surprise candidate: North America.

I make this suggestion based on a comparison I made of the per capita consumption trends for the seven regions.

The US Census Bureau International Database provides population data from 1950, and projected population trends till 2050, for nearly every country in the world, and also provides regional population data for NA, SA, AF, EU and FS.  The population data for ME and AP are buried within a larger region of “Asia” as defined by the census bureau, so I had to calculate the populations from the individual countries to match the BP-defined regions of ME and AP.   

Composite plots of the reported (1965-2009) and predicted (2010-2050) per capita consumption in units of barrels per person year (b/p·y) trends for seven regions are shown in Figure 18.

(4-23-11: the profile for ME in figure 18 was corrected because the original figure used census bureau population data for ME from 1950-1995 instead of 1965-2010; double check all other regions; corrected narrative to follow)
(5-9-11: the profiles for NA and SA in figure 18 were corrected because I failed to recognize that the aggregated population data of the US census bureau does not include Mexico, rather, Mexico get included in South and Latin America. Last time I checked Mexico is still part of North America. Argggg.... I went back to correct the annual populations for NA to include Mexico and for SA to exclude Mexico. This reduced NA’s and increased SA’s per capita consumption; correct the narrative to follow)
(5-26-11: the profile for EU was corrected because I failed to recognize that the aggregated population data of the US census bureau for EU also included Russia. Russia as part of Europe, what are they doing? Anyway, correct the annual populations for EU to exclude Russia. This reduction in EU’s population causes its per capita consumption to be slightly higher; correct the narrative to follow)

While NA’s per capita consumption has ranged from 20-21 b/p·y since 1981, only three other regions, EU, FS and ME, have broken the 10 b/p·y level. For EU this level of consumption only last from 1971 to 1980, and for FS, it lasted from 1974 to 1991. ME broke the 10 b/p·y barrier in 1997 and has been steadily increasing it per capita consumption to 12 b/p·y. EU has been in a range of 9-10 b/p·y since 1970, and SA has been in the range of 3-4 b/p·y since 1970. AP has steady increased from 1 b/p·y in 1980 to 2.5 in 2008. AF has never been greater than 1.2 b/p·y.

Eventually, the decline in exports and declining intra-regional production will cause NA's per capita consumption to decline below that of ME in 2020, and ME assumes leadership as the largest per capita consumer for the next 38 years. But ME’s declining production, which is declining faster than NA’s, and increasing population, which is increasing faster than NA's, causes ME’s per capita consumption to drop below that of NA in 2048.

By 2048, NA’s per capita consumption of 3.9 b/p·y is about the same as SA’s present day per capita consumption (4.4 b/p·y in 2009), and lower than FS’s present day per capita consumption (5.1 b/p·y in 2009), and EU’s (9.4 b/p•y in 2009). NA declines to EU's present day value by about 2026.

This suggests that NA, due to its lower population growth rate and lower rate of decline in production, has the potential to transition over the next 20-25 years to a lower petroleum consumption rate that is comparable to something the same as FS or SA today.

A pessimistic viewSome people will see this as a shocking decline in standard of living.

To those who see it this way, I ask, just where are you going to go to avoid this?

I suppose that you could move to ME in 2020. However, for reasons that I have explored in several previous posts (Bahrain's central location and geopolitical importance to the US and KSA; Survey of Oil Exports from North Africa; Survey of Oil Exports from the Middle East ), I don't see the ME as being some island of stability over the next 20-30 years. To the contrary, as different countries in the region hit zero-net exports domestically, there will be great risks of political instability that could spill over to the remaining oil exporters. Nearby oil-hungry regions like AF and EU will be eyeing the remaining sources of petroleum, and I expect that there will be continuing attempts to take the oil by force.

What about EU? Its per capita consumption is predicted to drop below that of FS in 2017 and then below that of SA in 2018 and then below that of AP 2032. It will join AF at the bottom with essentially no per capita consumption (0.03 b/p•y) in 2035. This could be very ugly indeed.

AP's high dependence on imported oil looks is very worry some. Of course there are many areas in AP, like rural India and China, that never been a petroleum-driven economy, and have very low per capita consumption rates. But still a petroleum driven agriculture has driven the production of food, which in many areas of AP now have to import. Moreover, the large cities in AP, I think, are going to have real problems in sustaining and feeding themselves, if petroleum exports decline and then go away entirely.

SA an FS are possibilities, with SA looking the better of the two in terms of a more gradual decline than FS. Still, NA consumption per capita looks to will remain much higher than either of these two regions for the next 50 years. As a previous commenter on this site pointed out, the USA has plenty of energy slack and many improvements in energy efficiency could made without too much pain.

A (sort of) optimistic view

Other people will see my comments about North America as being way too optimistic.

To those who see it this way, I just want to point out that although NA will likely have continued high levels of intra-regional production and moderate population growth, it also has the farthest to fall in terms of per capita consumption.

From a previous post on a related topic, I estimate that that the last time the USA had a per capita consumption rate of 3.9 b/p·y was 1915-1920. Perhaps for NA that number gets bumped up a bit as Mexico's present day consumption is only about 7 b/p·y. At the steepest part of the declining per capita consumption curve from 2012 to 2018 (Figure 18) I estimate the annual decline to be -3 %/yr. The corresponding relative annual drop in standard of living will likely be a gut-wrenching experience for most of the families who will live through this transition. Still, where else would you rather be? Going from 18.1b/p·y in 2010 to 7.4 b/p·y in 2030 will not be easy, but, I would rather do that than go from 9.4 b/p·y to 0.9 b/p·y as EU is projected to. To put it another way, given a choice, I'd rather be living in the per capita consumption equivalent of UK or Mexico in 2009 (10 and 7 b/p·y, respectively) than in Sudan in 2009 (0.8 b/p·y; estimate from Relating Per Capita GDP to Petroleum Consumption and Exports for the MENA Countries).

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This is the analysis that just keeps on giving. Based on my regional analysis presented in part 2 and part 3, I can now make some predictions about peak oil and total recoverable oil (Q∞) in these regions and globally, as well as give a longer term perspective on global petroleum consumption and population growth and decline. I hope you will join me next time when I explore these topics.