Post Peak Oil Economic and Population Scenarios: Part 1 Introduction and the Exporter Regions

As promised in my last post, I will spend some time writing about my analysis of the implications of the results from my recent ten part series, “Predicting Global and Regional Petroleum Consumption Trends” (starting here at Part 1). In that series, to remedy some of the deficiencies of my previous ELM analysis, I developed and presented my PIE analysis process, to predict future petroleum consumption trends for nine different regions, based upon the recent petroleum Production, Import and Export rate trends for each of the nine regions.

In this series of posts, I will consider some of the likely economic and population scenarios, based upon those predicted consumption and import/export trends for each of the nine regions, and, some mitigation measures that might help delay or soften the most negative implications.

Introducing some basic assumptions for the scenario

Presenting scenarios of economic and population changes, in view of peak oil, require some assumptions, and I want to articulate as clearly as possible what my assumptions are. Of course, these assumptions are somewhat speculative, because the world as a whole, has never faced an extended period of declining petroleum consumption. Optimists will simply write these scenarios off as being based on faulty assumption and continue merrily on their way to a bigger brighter future, where everyone in the world lives at the same standard of living as in the western developed countries.

Nevertheless, I believe that there are a few reasonable assumptions that can be made:

1) The relative economic decline in any one region, as quantified by a relative decline in per capita GDP, will be proportional to the relative decline in per capita petroleum consumption rate for that region.
It is inherent in my PIE analysis that the future import and export trends for each region have been accounted for, and, for the purpose of this analysis, I am going to assume that alternative fossil fuels could not or will not be ramped up in time to make much of a difference for the one area that petroleum has been critical for economic growth: transportation.

My hunch is that a decline in per capita petroleum consumption would cause a proportion decline in per capita GDP, but of course, a declining GDP could cause “demand destruction” leading to a decline in decline in per capita petroleum consumption. So, I am satisfied to just assume that petroleum consumption and GDP will change contemporaneously in the same direction.
Indeed, a study of 88 countries by Sinha found that per capita GDP growth and per capita energy consumption growth are “co-integrated,” which is to say, an increase in energy consumption will cause a increase in GDP, and, an increase in GDP will cause an increase in energy consumption. However, this does not prove the inverse, that a decrease in energy consumption will cause a decrease in GDP, or, vice versa.

Proving the inverse causal relationship might be more difficult when considering just per capita petroleum consumption and GDP. For instance, it might be hard to show that declining regional production can cause a decline in GDP for any one region because the domestic decline in production could be offset with increased import rates, or decreased export rates, to improve the region’s net import situation, or, perhaps other fossil fuels, gas and coal, could be used to partially offset declining petroleum use. There is also the possibility that there could be a significant lag time between a drop in petroleum consumption and drop in GDP.

For all of these reasons, there is not a lot of data out there to test a causal relationship between petroleum consumption decline and GDP decline. One would need a circumstance where, for a region, there was a large and enough sustained drop in production and/or imports to assess the effects on GDP. There are, however, a few examples of this happening.

For instance, there is evidence that declining oil production caused (“Granger caused,” to be more specific) a decline in GDP in the (see Reynolds and Kolodziej) in the Soviet Union/former Soviet Union in the late 1980s–early 1990s. Perhaps the relationship was clearer here because an external oil import source was not readily available to the Soviet Union during this period.

And, there is evidence of a positive relationship between the per capita petroleum consumption rate and per capita GDP for different countries, and, between downward changes in oil consumption and GDP, that occurred during the oils shocks in the USA in the 1970 (briefly reviewed and referenced in: An Export Land Model Analysis for the USA-Part 4; Relating Per Capita GDP to Petroleum Consumption and Exports for the MENA Countries).

2) Population decline in any one region would be contemporaneous with a decline in per capita petroleum consumption rate, after the per capita consumption rate drops below 1 barrel per persons per year (“bp/y”).

I have spent time analyzing and discussing this topic in previous posts, so I will simply refer you to Part 9: Estimating the critical levels of petroleum consumption necessary to sustain the modern food production system, and, to my previous series The relationship between hunger and petroleum consumption-Part 1. To summarize my thinking on this subject, it looks like the world’s modern petroleum dependent food production and distribution system needs about 1 bp/y to function at a level that avoids various proxy indicators of starvation. My assumption is that once a region’s per capita petroleum consumption drops below 1 bp/y, the food production system for that region would become limited, and further declines in petroleum consumption will mean proportional population decline. In other words, the population of region will contract in other to keep petroleum consumption at 1 bp/y.

To take an example for a hypothetical region: above a per capita petroleum consumption rate of 1 bp/y, there is adequate food production and the population will continue changing at whatever is the current trend for population change (up or down depending on demographica and other factors). However, below a per capita petroleum consumption rate of 1 bp/y, the food system is compromised, and with it, so to the population that can be sustained. Consequently, the population will decline to keep the petroleum per capita petroleum consumption rate equal to 1 bp/y. Assume, for example, that our hypothetical region has dropped to a petroleum consumption rate of 1 bp/y, has a population of 100 million people and has a population growth rate of 1 percent per year. So long as that region’s petroleum consumption is greater than 0.1 billion barrels per year (“bby”) the population will continue to grow at 1 percent year. However, if petroleum consumption were to drop to say 0.08 billion barrels per year, then I hypothesize that the population will drop to 0.08 billion or 80 million such that the per capita consumption rate adjusts back to 1 b/py.

Of course, the 1 b/py limit before population decline is only a rough approximation, and, I would not be surprised to see region-to-region variations from this assumption. For instance, other regions could send food aid to the region facing starvation. This would be the equivalent of exporting oil to the starving region for free, since the food would have been produced with the aid of the petroleum-driven food production system in the other region. Perhaps, some optimists will say that a starving region could produce the same or a growing amount of food (e.g., using sustainable food production practices) without any petroleum whatsoever. However, I am skeptical about the extent such measures, if even possible, could be implemented on a large enough scale fast enough to effectively mitigate starvation and death. Perhaps, sustainable food production practices could help somewhat. In this case, I see these measures as the equivalent of just assuming the critical per capita petroleum consumption rate number need to sustain the food production and distribution system is not 1 bp/y for the region, but some other lower number. That’s fine, pick whatever number between 1 and 0 b/py that you want to use; as you will see, for most regions, this would only shift my population decline scenarios back by a year or two.

3) The minimum that each region’s population can drop to, after reaching 1 b/py, will equal the population level that existed prior to the petroleum-driven food production system.

I will make a similar assumption to what I made in my earlier series (Part 10: Peak oil exports, peak oil and implications for population change), that the population of each of my nine regions in the year 1900 is a reasonable estimate of what populations are possible to sustain without significant petroleum inputs. If you want to go back to before the discovery of oil, in the 1850s, that’s fine, but it does not change the principle assumption, which is that, without petroleum, the present population of a region would stop growing and drop back down to a level that is much lower than the present number, or, the future number based on the present population growth trend.


Just how fast would the population drop to the pre-petroleum number? See assumption (2). The rate of change will be governed by the rate at which petroleum consumption declines, after the per capita rate drops below the 1 b/py limit.

The specific year 1900 population numbers for my regions are obtained or derived from The World at Six Billion, HYDE version 3.1, and Population Statistics, and are summarized below:

1) North America (NA): 82 million (from The World at Six Billion)
2) South America (SA): 74 million (from The World at Six Billion)
3) Europe (EU): 400 million (from The World at Six Billion)
4) The former Soviet Union (FS): 121 million (from Hyde, statistics for Commonwealth of Independent States)
5) Middle East (ME): 37 million (from Hyde)
6) Africa (AF): 141 million (from The World at Six Billion)
7) China (CH): 400 million (from Population Statistics)
8) Japan (JP): 43.8 million (from Population Statistics)
9) The remaining Asia-Pacific (rAP): 463 million (HYDE's population estimate of Asia in 1900 plus Oceania (5 million) minus the population estimates for FS, ME, CH and JP)

That tallies up to 1.66 billion, or, about 24% of the world’s present population of 7 billion.

I can imagine both optimists and pessimists objecting to this assumption. On one hand, some optimists will argue that sustainable food production practices could support much higher populations than these. On the other hand, some pessimist will argue that there is no way that the world could go back a non-petroleum food production system and still be able to support these population levels. That is, other resource limitations will limit food production, such as: scarcity of fresh water, farm land being encroached by urban sprawl, overused soils being depleted of nutrients, declining fish stock and climate change.

I don’t see how to resolve this kind of debate; it is just too speculative to say what kind of offsetting adjustments that 21st century knowledge, applied in a post-petroleum, 19th century like world, can make to mitigate these other effects of resource depletion. I do think however, that absent an energy replacement for petroleum, an energy source that can do the same things and be used in the same way as petroleum can, wewill see the economy and food production go down, and with it, population.

My main goal here is to assess which regions will most vulnerable to these changes over the next 50 years.

As I am sure you can appreciated by now, predicting the per capita consumption rate for each region is central to my analysis. I already have predictions of future petroleum consumption from my PIE analysis, done in my previous series “Predicting Global and Regional Petroleum Consumption Trends” (starting here at Part 1).

So, now I need predictions of future population trends for each of the nine regions. Fortunately, the US Census Bureau International Database provides population data from 1950, and projected population these trends forwards to 2050, for nearly every country in the world, and from theses the regional population data for each or my nine regions can be calculated. Additionally, since the census bureau only extrapolated population trends out to 2050, but, I want to extend my prediction scenario out to 2065, I need to extend the census bureau’s population trend prediction out another 15 years. To extend this, I did a linear regression analysis on the last ten years of the census bureau’s predicted growth rate trend, (i.e., the yearly change in population from 2040 to 2050), and, used the best fit slope and intercept to interpolate the growth rate trend out to 2065.

I think that covers the assumptions that underlie my analysis, so let’s start with the net petroleum exporters.

Economic and Population Trends for the Net Petroleum Exporting Regions

Middle East (ME)

As this is the first region discussed, I will spend a little bit more time explaining the data presentation, whichwill be the same for the subsequent regions.

For each of the nine regions, I show the population growth trend, that is, the yearly percent change in population. Actually this is better states as being the population change trend, as there are some regions that presently, or soon will, have negative population growth. In each case, the open circles are the data reported by the US census bureau, and the solid line is the bureau’s predicted trend, plus my interpolation of that trend out to 2065.

Figure 1 shows the population change trend for ME.


As you can see, the present growth rate is about +1.7 %/y, which is down from a ridiculously high growth rate of +4.1 %/y in the early 1980s. As you can also see, although the population growth rate is predicted to continue declining, it will still be positive in 2065. That means that the ME’s population is predicted by the census bureau to continue to increase beyond 2065, probably hitting a zero growth rate in the 2070s.

The right hand side axis in Figure 2 shows the actual population (blue circles) and predicted population (dark blue line), based on the population trend shown in Figure 1.




The solid blue line indicates that, if the present population growth rate trend continues, then ME’s population will expand from 212 million (0.212 billion) in 2011 to 341 million (0.341 billion) by 2065.

The left hand side axis in Figure 2 shows the calculated per capita petroleum consumption rate (red circles), and, my predicted per capita consumption rate, which is based on the petroleum consumption rate predicted for this region from my PIE analysis, divided by the predicted population.

The ME’s per cap petroleum consumption rate was 13.7 b/py in 2011, and, the per cap rate is predicted to peak at almost 14 b/py in 2014. Thereafter, per cap petroleum consumption stops growing and goes into decline. It is worth noting that this predicted peak is 6 years earlier than the ME’s predicted absolute peak in petroleum consumption of 2020 (see e.g., Figure 4 in Part 2 of my earlier series). This is because of the on-going population growth rate in the ME of +1.7 to 1.5 %/y from present to 2020.

Overall then, from 2011 to 2020, the predicted drop is about -2.8% or about -0.3 %/y. 

The per cap petroleum consumption rate drops even faster from 2020 to 2040, from 13.3 b/py to 7.2 b/py, a 46% decrease, or, -2.3 %/y for 20 years. This steep and steady decline reflects the combination of predicted declining petroleum consumption and increasing population. From 2040 to 2060, the per cap petroleum consumption rate decline is still steeply declining on an annual percentage basis (-3.1 %/y), although the absolute change (7.2 to 2.7 b/py) is not quite as large. Towards the end of the study period, the decline is less steep, as the population grow rate approaches zero.

Based on these predictions, it is hard to imagine how the ME region as a whole, will have economic growth past 2014, after the per capita petroleum consumption rate stops growing. Rather, after a brief plateau, from 2020 and on, we are likely looking at economic decline, perhaps GDP declining on the order of -2.3 %/y for the next 20 years, assuming direct proportionality between GDP and petroleum consumption.

Going from a per capita petroleum consumption rate of 14 to 1.9 b/py corresponds to an 86% decline. Assuming directly proportional behavior, this would mean a huge relative drop in GDP per capita.

Still, even by the end of my study range, in 2065, the cap petroleum consumption rate is equal to 1.9 b/py, which is well above my starvation threshold of 1 b/py.

This probably means a very crowded ME with a still growing population of 340 million, about 60% larger than today, but with a much lower standard of living.

Former Soviet Union (FS)

Figure 3 shows the population change trend for FS.



As you can see the FS’s population growth stopped and then plummeted in the late 1980s to early 90s, going from positive to negative in 1994, and, has never recovered into positive territory since then. According to the US census bureau, the present population “growth” rate is about -0.12 %/y, i.e., a population de-growth rate. The census bureau predicts that this negative population change trend will continue, reaching about -0.43 %/y by 2050. If that trend continues, the population change will be -0.58 %/y by the end of my study period in 2065.

The right hand side axis in Figure 4 shows the actual population (blue circles) and predicted population (dark blue line) based on the population trend shown in Figure 3.

As you can see, FS's population has been gradually declining since 1994, and if the trend continues, the population decline will continue on a somewhat similar pace. The solid blue line indicates that, if the present population change rate trend continues, as predicted by the US census bureau, then FS’s population will decline from its present 0.283 billion in 2011 to 0.235 billion by 2065.

The left hand side axis in Figure 4 shows the calculated per capita petroleum consumption rate (red circles), and, my predicted per capita consumption rate (solid red line).

The FS’s per cap petroleum consumption rate peaked at 11.4 b/py way back in the 1980s, then plummeted down to 4.3 b/py in 2001 and then has recovered to 5.0 b/py in 2011. Notice that although the population growth rate went negative by 1994, there was no dramatic drop in population from 1980 to 2001 as the per capita consumption rate was plummeting. This is consistent with my hypothesis that population decline due to decline petroleum consumption would not occur until a region drops below the 1 b/py threshold.

In my earlier series, predicting petroleum consumption rates for FS (Figure 11, Part 3), I showed how FS’s predicted petroleum production and export rate trends would result in FS’s domestic consumption rate steeply declining and hitting zero by 2027.

The consequence of this prediction is reflected in Figure 4: a steeply declining per capita petroleum consumption rate that hits zero by 2027. The predicted decline in petroleum consumption is so steep that the predicted more mildly declining population trend doesn’t do much to mitigate the per capita petroleum consumption decline. For instance, by 2015 the per capita petroleum consumption decline rate is about -9%/y, and by 2020 the decline rate is -17 %/yr.

But, according to this scenario, FS would have bigger problems than the economic declines associated with declining per capita petroleum consumption: by 2022 the per capita petroleum consumption rate drops below my threshold of 1 b/py. It only takes another 5 years before hitting 0 b/py, implying a sharp decline in population from its predicted level of 278 million in 2022 to the year 1900 pre-petroleum level of 121 million (light blue line in Figure 4 labeled “population predicted w peak oil”). That is a 56% population decline in 5 years—a disaster in other words.

In summary then, if the predictions of FS’s domestic petroleum production (peaking now and about to decline as sharply as it went up), and, increasing export rate trend are correct, and continue on their present path, then this region would suffer a very steep economic contraction and population collapse within the next 10-15 years.

The implication of this scenario, to me, is that it would be rational for the countries in the FS region to intervene in the present trends at some point, at least to mitigate economic and population collapse. It would most rational for these countries to start reducing the export rate right now if they appreciated how rapidly their remaining oil will deplete at the present increasing consumption rate and export rate trends.

However, there is still the hope of new sources of petroleum (e.g., Arctic oil or fracking), although, I don’t see evidence in the production data reported in the BP review to support this. And, of course, the present petroleum exports represent a significant source of income that helps support the economy. Therefore, my hunch is that it is most likely that intervention to reduce exports will occur later than sooner, and therefore, there would be a sharp decline in exports, as domestic per capita consumption reaches 1 b/py, and the threat of starvation loomed nearer.

How long could the FS keep itself at 1 b/py in order to stave off a sharp population decline, while still exporting some oil, and, what implications would this have on its major importers (e.g., Europe and Asia) of FS’s petroleum?

For now, I am going to set aside the answers to these questions, until I finish my survey of all nine regions.

Africa (AF)

Figure 5 shows the population change trend for AF.



Similar to the ME, AF population growth rate peak in 1981 at just over +3 %/yr and has been declining since then. But the rate of decline is quite slow, and so in 2011, the population growth rate was still +2.25 %/yr. The US census bureau projection and my extrapolation puts AF’s population growth rate still at +1.2 %/yr in 2065. At this rate of decline in the growth rate, zero population growth would not be reached until well into the next century.

The right hand side axis in Figure 6 shows the actual population (blue circles) and predicted population (dark blue line) based on the population growth trend shown in Figure 5.



A growth rate of 2.2 to 1.2 percent per year may not seem like much, but as illustrated by the dark blue line, it adds up to AF’s present population doubling from about 1 billion to 2 billion by 2047, and reaching 2.6 billion by the end of my study range in 2065.

The left hand side axis in Figure 6 shows the calculated per capita petroleum consumption rate (red circles), and, my predicted per capita consumption rate for AF.

As you can see, AF’s per capita consumption rate increased above 1 b/py in 1980, and has been ever-slightly increasing for the last 30 years, to about 1.2 in 2011.

Unfortunately, AF’s petroleum production rate appears to be peaking now, and, I predicted it to decline quite steeply in the immediate years to come (see e.g., Figure 16 in Part 4 of my earlier series). And assuming that the present export rate trend were to continue, AF’s domestic consumption rate would also decline quite steeply in the immediate years to come. This means that AF’s per capita petroleum consumption rate drops even more steeply—due to the combination of petroleum consumption declining and population increasing. Since AF is just barely presently over my 1 b/py threshold for starvation and population decline, this scenario predicts that a population decline starting right now in order to keep the per capita rate at 1 b/py (light blue line in Figure 6).

It looks like my predicted declines in petroleum consumption rate, per capita consumption rate and population are all earlier than what the most recent data are suggesting, however. I think this could be due to a couple of factors that my PIE analysis can not easily account for. For instancem from Figure 16 in Part 4 the most recent net export trend is down to a greater degree than predicted from the previous 10-trend used in the PIE analysis. Also, I suspect that there is substantial food aid going to some countries in AF is the equivalent to oil imports (since the food is produced by a petroleum-driven food production system), that are not accounted in the BP statistical review data, and which help sustain population growth. Additionally there is growing pipeline oil thefts and refining and black market selling for domestic and foreign use (see e.g., Nigeria’s booming illegal oil refineries; Africa's oil theft crisis), which are also not accounted for by BP’s statistics, and therefore are not part of my PIE analysis.

If the predicted population decline scenario for FS looks bad, then the population decline scenario for AF is an unmitigated disaster—a population drop from 1 billion to the 1900’s level of 141 million by 2026—that is, an 86 % drop.

This, of course, raises the question, similarly to what I raised for FS, to what extent could this devastating decline in population be mitigated or delayed by the oil producing countries in AF cutting exports to other regions? And what effect does this have on the major importer’s of AF’s oil (e.g., North America, Europe, Asia)?

Again, I am setting this aside until I finish my nine-region survey. However, I will say this—I do not see anyway that AF’s present and projected population growth rate can continue on as shown in Figures 5 and 6, and, I am very skeptical that even the present population of 1 billion could be sustained in a future where domestic petroleum production is in decline and the western developed nations are in economic decline resulting less domestic food production, less food imports and less food aid to AF in the near future. To the contrary, countries in the ME and Asia having been buying up farm land in AF with the intent of producing food for export to these regions (see e.g. articles cited in, Export land model analysis of food production and consumption—Background).

This is all too depressing, let’s move on to South America.

South America (SA)

If you have managed to get this far, then you should be used to the pattern: Figure 7 shows the population change trend for SA.



SA’s population growth trend has been declining since 1965 when it was at about +2.6 %/y. The rate in 2011 was +1.15 %/y and, if I extrapolate the US census bureau’s predicted trend, zero population growth is reached in about 2060, and the population declines thereafter.

The right hand side axis in Figure 8 shows the actual population (blue circles) and predicted population (dark blue line) based on the population growth trend shown in Figure 7.



The solid line blue line illustrates the continued population increase from present levels of 483 million to the predicted peak in 2060 of 632 million.

The left hand side axis in Figure 8 shows the calculated per capita petroleum consumption rate (red circles), and, my predicted per capita consumption rate for SA.

SA’s per capita consumption has been on a bumpy upwards trend since its low level of 2.9 b/py in 1965, peaking at 4.1 b/py in 1980, dropping back down to 3.6 b/py in 1985, finding a new peak of 4.4 b/py in 1999, dropping back down to 4 b/py in 2003 and then finding yet another high of 4.7 b/py in 2011. My PIE analysis, however, suggested that production is about to peak, but the net export rate trend was flat to slowly declining to zero by 2037 (see Figure 21 from Part 5 of my previous series). Consequently, the domestic consumption rate for SA was predicted to gradually decline going forwards.

Because the consumption rate is predicted to decline and the population is predicted to continue increasing until 2060, SA’s per capita petroleum consumption rate is predicted to be on a downwards trend dropping from 2 b/py in 2011 to 1.6 b/py in 2065.

In fact, like AF, over the last few years, SA’s per capita consumption rate has exceeded the predicted rate—mainly this is due to net exports being less than that predicted by the 10-year trend (again, see Figure 21 from Part 5).

In summary, SA is predicted to have a n economic decline because per capita consumption rate is predicted to decline. Still, a decline from 2 b/py in 2011 to 1.6 b/py, is only 20 % over a period of 54 year, or -0.37 %/yr, which is a much milder decline compared to the other three regions examined in this post. Plus the per capita consumption rate never drop to my threshold rate, of 1 b/py, for starvation and population decline, at least within my study range out to 2065.

Overall then, of the four present net petroleum exporters, SA looks best off for the next 50+ years with relatively mild economic decline. ME is next with relatively larger economic declines, but, at least the per capita petroleum consumption rate doesn’t decline to the point where there is starvation and population decline. FS, on the other hand, would experience a significant economic and population decline starting around the early-2020s. The situation for AF looks worst off of four regions, with a predicted steep economic and population decline starting now and continuing through the mid-2020s. This makes the FS and AF regions primary candidates for an intervention in their existing increasing export rate trends—a topic that I will explore later on in this series.

Although I try to keep this blog on a fairly neutral non-emotional level, it is hard to predict starvation and population declines of 56 and 86 percent for some regions of the world, and not be depressed by the shear magnitude of human suffering implied by these predictions.

My irrational hope for the new year is that my predictions are completely wrong, and, that humanity will find a way out of the predicament that it appears to be stumbling towards.
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Next time, I will present my economic and population scenarios for the remaining five regions—the net importers.

Predicting Global and Regional Petroleum Consumption Trends Part 10: remaining Asia Pacific

There is quite a bit of material to cover here, so I will limit my introductory remarks to a reminder that the "remaining Asia Pacific" (rAP) refers the group of countries in Asia, other than the countries of the former Soviet Union (FS), China (CH) and Japan (JP), all of which have been discussed in previous parts of this series.

The remaining Asia Pacific’s production, consumption and net export trends: an ELM analysis

Figure 44 presents the BP review’s reported petroleum production, consumption and calculated net exports rates (dark blue, bright red and dark green open circles respectively) and the corresponding nonlinear least squares analysis (NLLS) logistic equation best-fit curves (solid lines with the same respective colors). 

 

Production rates in rAP were modeled using two logistic equation fits to data in the ranges 1965-1982 and 1983-2011, respectively (solid blue lines).  Similarly, consumption rates were modeled using two logistic equation fits to the data from 1965-82 and 1983-2011, respectively (solid pink and red lines).

The best fit parameters of Q_o, Q_∞ and the rate constant "a" are summarized in Table 10 below:

Table 10: summary of best fit parameter for production and consumption data for rAP
	Qo (bbs)	Q∞ (bbs)	a (yr-1)
Production 1965-1982	0.99	21	0.20
Production 1983-2011	22	95	0.066
Consumption 1965-1982	6.1	81	0.091
Consumption 1983-2011	17	228	0.087

As illustrated in Figure 44, after declining to a local minimum in 1982, rAP’s petroleum production rate slowly increased and then hit a peak of 1.6 bby in about 2000.  This peak reflects a composite of production peaks for several major producers in this region: Indonesia in 1991, Australia in 2001, Vietnam and Malaysia in 2004, and Brunei in 2006.  Since peaking, the production rate has slowly declined, e.g., in 2011 production of 1.43 bby was 88% of the peak rate in 2000.

In contrast to flat to declining production, rAP’s petroleum consumption accelerated after 1982, similar to CH (see Figure 39, Part 9).  Larger countries in this region seeing multifold increases in consumption since 1982 include: India, South Korea, Taiwan Thailand and Vietnam. 

Still, the overall relative increase in production in this region is not quite as dramatic and sustained as CH’s relative increase.  Part 9, showed how CH’s consumption rate from 1982 doubled two times by 2004, and might double again by 2016, if it can find the oil to import or produce domestically (which I double).  The consumption rate in rAP doubled from 1982 to 1994, but, since 1994, has risen by “only” another 70 percent.  The deceleration is also indicated by the best fit of the logistic equation to the consumption data, suggesting that consumption might be at or near peak.

Predicting Petroleum Export Rates from rAP to other Regions

Figure 45 shows the relationship between petroleum production rates and export rates for rAP, as already worked out in my previous study from a few months ago.   This figure is the same as Figure 9 in Part 2 of “Relationship between Petroleum Exports and Production.”

Despite overall production rates peaking in 2000, the trend is for increasing exports as a percentage of production (solid regression line, r²=0.52).  However, this overall positive trend is combination of declining exports to JP and NA, and, increasing exports to CH, EU, SA and AF.

Figure 46 shows the predicted absolute regional exports from rAP to the other regions.  These plots are based upon the combination of the production rate trends shown in Figure 44 and the export trend lines shown in Figure 45.

According to this prediction scenario, rAP’s absolute total exports (black line) will peak at about 0.7 bby in 2012-2013.  About 43% and 22% of rAP’s total exports in 2011 went to CH and JP, respectively (compared to 35% and 48% respectively in 2000).  Exports to JP are on trend to end in about 2026.  Exports to CH are predicted to peak in about 2015 and decline thereafter.

Predicting Petroleum Import Rates to rAP from other Regions

Figure 47 shows the sum (black line), and individual import contributions, predicted for each of the other eight regions, to rAP.

This figure reminds me of the analogous figure for JP (Figure 37 Part 8) in that import are highly reliant upon ME.  Of the 3 to 4 bby in petroleum imports to rAP from 2000 to 2011, 80 to 72 percent came from the ME.  That’s about the same as the proportion of JP’s imports coming from ME.  What is different is that imports from the ME to rAP have been going up over the last decade while imports from ME to JP have been going down.

It should be no surprise that I am predicting rAP’s total future imports to be substantially defined by what is expected for ME’s future export trends.  Because I am expecting ME’s exports to at peak now and to decline in the near future, I expect rAP total imports to peak in 2012-2013 and decline thereafter. 

Several other regions export relatively smaller amounts (<0.4 bby) of petroleum to rAP (AF, CH, SA, EA, JP, NA) and these add up to about 0.8 to 1.1 bby, with various predictions of ebbs and flows from these regions over the next 50 years, as illustrated in the lower portion of Figure 47.

Predicting Consumption Rates for rAP based on the PIE analysis

I applied my normalization to rAP in the same manner as done for NA, SA, AF, EU, JP and CH.  For rAP, the average calculated consumption rate, based on the summation of production plus imports minus exports for the 2001-2011 time range, was 0.151 ± 0.111 bby lower than the reported consumption rate for rAP as reported in the BP review.  Therefore my normalization for CH consisted of adding 0.151 bby to the predicted future consumption rate and adjusting total net exports downwards by this same amount.  And, like the other regions, I did not attempt to distribute this correction proportionally among the individual absolute exports and absolute import to and from each of the other regions.

Figure 48 shows the production, consumption and net export data, and corresponding best fit curves, the later two now shown as dashed lines.  Added is the predicted net export (light green solid line representing total absolute exports minus total absolute imports with the -.151 bby correction) and consumption (blood red solid line) rate prediction curves, based on my PIE analysis (exports minus imports with the 0.151 bby correction). 

The results presented in Figure 48 suggest that, if rAP’s production rate follows the decline trend predicted by the logistic equation best fit (solid blue line), and rAP’s export and import rates continue along the trend lines shown in Figures 46 and 47, respectively, then the predicted total net export rate curve (solid light green line) reaches a peak negative value of about -3.4 in 2013, corresponding to peak net imports, after which, net imports start to decline. 

My PIE and the ELM analysis are in good agreement, giving very similar prediction curves for rAP’s consumption.  Apparently for the ELM analysis there is enough deceleration in the reported consumption data for the NLLS best fit of the logistic equation to predict a present peak and decline, in agreement with the PIE analysis, which only looks at production, import and export trends (see Part 1 for a reminder).

The rAP’s combination of trends peaking net imports and decreasing domestic production, leads to my prediction that rAP consumption rate is peaking now at about 4.8 bby in 2010-11 and consumption will decline thereafter.  Essentially, declining domestic consumption and the prediction of declining imports from its primary source, the ME, set rAP on a downward trend in the future. 

At least the downwards decline is fairly mild, at first.  From 2011 to 2021, consumption is predicted to decline -13%.  But the decline in consumption picks up after that (as imports from ME and domestic production both go into faster decline) with a 33% decline from 2021 to 2031, and then 43 % decline from 2021 to 2031.  Overall from 2011 to 2041, consumption is predicted to have declined by 67%. 

Summary & Conclusion

The remaining Asia-Pacific regions has seen substantial increases in petroleum consumption for the past three decades, but the trends in this analysis suggest that further increases are unlikely.  After domestic production peaked in 2000, the last decade’s increase in consumption was fully supported by increased imports, and mainly imports from the Middle East.  But, as I pointed out in Part 2 the Middle East’s production has likely peaked and it own domestic consumption is increasing.  This means that the remaining Asia-Pacific regions can no longer expect continued increasing imports from Middle East. 

At least the remaining Asia-Pacific region’s predicted consumption decline rate for the next decade will be a mild -1.3 %/y.  This is much milder than expected consumption decline rates in Japan (-5.2 %/yr), Europe (-3.2 %/yr) or North America (-2.2 %/y) for the next decade and beyond.  But, by about 2021, as the decline rate in imports from the Middle East, and, domestic production rate both steepen, the remaining Asia-Pacific’s consumption rate decline is predicted to be in the range of -3.3 to -4.3 %/y.

A look at the net importing regions

Now that I have finished my survey of the five net importing regions (NA, EU, JP, CH, rAP), and in fact, completed my nine-region analysis, I want to step back and take a broader look at these net importing regions divided into major groups:  the developed world (NA, EU and JP), and, developing Asia (CH and rAP).  I am painting with a very broad brush stroke here, so apologies to Australia and New Zealand for being lumped into developing Asia. 

Looking at these two net importing groups gives us an opportunity to explore and test the concept of what Jeff Rubin refers to a “zero-sum world.”  The concept as I am applying it here is fairly simple: in a world of a static pool of oil available for exports, increasing petroleum consumption in one net importing region due to increase oil imports means decreasing imports in another net importing region. 

Does the present study provide any support for this? 

Yes, it does somewhat, although some other trends are more complicated than that. 

Figure 49 shows the sum of imports from each the net exporter regions (ME, FS, AF and SA) to my two net-importer groups: (NA EU JP; solid lines) and (CH rAP; dashed lines)

Figure 49 shows that from 2000 to 2011, there was a substantial decline in imports from ME to the NA EU JP groups (turquoise blue solid line) and a concurrent similar magnitude increase in imports from ME to the CH rAP group (turquoise blue dashed line).

That is, NA EU JP’s loss of oil from the ME appears to be CH rAP’s gain.  A zero-sum world.

Sort of the same “zero-sum” scenario is repeated for SA’s exports although the trends are less convincing.  From 2000 to 2011 there have been flat-to-slightly declining imports from SA to the NA EU JP group (lime green solid line), but, a concurrent larger increase in imports from SA to the CH rAP group (lime green dashed line).   So “zero-sum” is not as convincing because the CH rAP group gained substantially more imports from SA since 2000, than the decline in imports to the group NA EU JP.  In other words, SA was able to support oil imports to NA EU JP at a flat-to-slightly-declining rate while at the same time, greatly increasing imports to CH and rAP.  The predicted future import trends suggests that perhaps the “zero-sum” trend will become clearer for SA.

Something other than a “zero-sum” scenario has been happing with respect to FS’s and AF’s imports to these two groups.  I will call it “win-win,” because imports to both net importer groups has been going up over the last decade. 

Imports from FS and AF to the NA EU JP group (solid purple and brown lines, respectively) both went up substantially since 2000—in fact, slightly more than enough to offset the declining imports from ME and SA.  However, imports from FS and AF to the CH rAP group (solid purple and brown lines, respectively) also went up substantially since 2000, thereby supporting even greater consumption rate increases in this group. 

Figure 50 shows the consumption data an predicted future consumption (from the PIE analysis) added all together for the two net importer groups.

As you can see despite the declining imports from ME and SA, the NA EU JP group still managed a slight increase in consumption rate in the last decade, since 2000.  This is due to the increased imports from FS and AF that offset the declines from ME and SA and then some.  However, imports appear to have peaked in 2007, at about 8.9 bby, and have gone down since then.  Imports are predicted to steeply decline for the next two decades.

In comparison, imports to the CH rAP group dramatically increased since 2000—this is due to increased imports from all four of the net importer ME, FS, AF and SA.  Total import increases are predicted until 2015, after which a mild decline in imports is predicted.

The predicted decline rate in imports to the NA EU JP group is so steep, that in about five years, 2018, it crosses below the milder predicted import rate to the CH rAP group. 

Of course, a major goal of this study was to get some insight into what consumption rates might look like in view of the predicted domestic production, import and export trends—my so-called PIE analysis—for each of these nine regions.  We know from Part 6, Part 7, Part 8 that domestic production in NA is flat, is declining in EU, and is substantially non-existent in JP.  That steep decline in imports predicted for the NA EU JP group gives us a big hint about what’s in store for consumption rates for these regions going forwards.    

Here it is in Figure 51, the predicted total consumption rates of the NA EU JP groups versus to CH rAP group. 

In view of the above considerations, it is no surprise to see that, over the next 20 years, the predicted petroleum consumption rate decline for the NA EU JP group is much steeper than for the CH rAP group.  For instance from 2011 to 2031 petroleum consumption in the NA EU JP group is predicted to decline from 14.9 bby to 6.2 bby, a 58%  (-8.7 bby) decline.  In comparison over the same period, the predicted decline in consumption for the CH rAP group is from 8.2 bby to 6.1 bby, a 26% (-2.1 bby) decline.

Interestingly, by 2029, the NA EU JP group and CH rAP group are predicted to have nearly the same consumption rate of about 7.0 bby and 6.8 bby, respectively. 

What kind of world will that be in 2029?

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Well, at long last, I have completed my nine region analysis.  I will linger with the results for the next post or so, to explore the economic and population trends that these predicted consumption trends might imply (hint: I think that looking at per capita consumption could provide some interesting insights).

Predicting Global and Regional Petroleum Consumption Trends Part 9: China

Some analysts, looking at China’s (CH) stunning economic growth over the past 20 years, expect this trend to simply continue, thereby resulting in China overtaking the USA, to become the country with largest economy in the world.  For instance, the OECD estimates that China's economy will over take the combined economies of the Euro-Zone by 2013, and, then overtake the USA by 2017.  China's economy to overtake US in next four years, says OECD.  Similarly, based upon recent past growth rate, inflation rate and Yuan appreciation rate trends, the Economist predicted that China’s GDP will overtake the USA’s by 2018.  Indeed, the Economist points out that China has already over taken the USA in manufacturing output, patents granted to residents, car sales and total energy consumption, and, that China’s oil consumption would overtake the USA’s in 2021 (The Dating Game).  The EIA notes that China was the world's second-largest consumer of oil and liquids in 2011, and, second-largest oil importer, trailing only the USA in both categories (Economic growth continues to drive China's growing need for energy)

Some economic analysts, however, have a more pessimistic view, seeing signs that China’s export market is weakening, leading to the suggestion that at least the growth rate of China’s economy will be slower in the future if not declining (China Economy Heading for ‘Hard Landing’ as Exports Falter, Shilling Says).   

Still fewer economists, like Jeff Rubin, recognize that China’s continued economic growth will depend upon oil, in particular, oil imports (BP Report Shows Economic Growth Still Depends on Oil), and, that those oil imports will mostly come from sources that used export to the USA (Where Will China Find the Oil to Power its Economy?). 

Rubin’s view is that we are in a “zero-sum world (12 min).”   In the present context, zero-sum means that if exports increase to one region (e.g., China and the remaining Asia Pacific Regions) then exports to another region (e.g., Japan, North America, Europe) must go down.  This is a view that this series supports to some extent, and I will try to point where it does, in this, and the next post.

As you will see, China’s imports have indeed been increasing from several regions, some of which have traditionally been strong exporters to North America.  These increasing import trends should support China’s economic growth for the next five to ten years, albeit at a slower rate than seen in the last decade.  However, if oil consumption and the economy are tightly linked, then, as petroleum exports to China’s start to decline, the prospects for further economic growth also will decline.

China’s production, consumption and net export trends: an ELM analysis

Figure 39 presents the BP review’s reported petroleum production, consumption and calculated net exports rates (dark blue, bright red and dark green open circles respectively) and the corresponding nonlinear least squares analysis (NLLS) logistic equation best-fit curves (solid lines with the same respective colors). 

Production rates in CH were modeled using two logistic equation fits to data in the ranges 1965-1982 and 1983-2011, respectively (solid blue lines).  Similarly, consumption rates were modeled using two logistic equation fits to the data from 1965-82 and 1983-2011, respectively (solid pink and red lines).

The best fit parameters of Q_o, Q_∞ and the rate constant "a" are summarized in Table 9 below:

Table 9: summary of best fit parameter for production and consumption data for CH
	Qo (bbs)	Q∞ (bbs)	a (yr-1)
Production 1965-1982	0.24	12.3	0.24
Production 1983-2011	36.2	371	0.026
Consumption 1965-1982	0.22	10.1	0.26
Consumption 1983-2011	7.1	485	0.074

As illustrated in Figure 39, after declining to a local minimum in 1982, CH’s production rate has been slowly increasing over the last 3 decades.  In 1992, the production rate of 1.04 bby was 33% greater than the production rate of 0.78 bby in 1983.  By 2002 the production rate of 1.22 bby was up 18% compared to 1992, and, in 2011, the production rate of 1.5 bby was up 22% compared to 2002. 

However, this growth rate in production of 2-3 %/yr was not enough to keep up with the growth rate in consumption, and 1993, CH’s consumption crossed-over its domestic production to make CH a net importer of petroleum.

CH’s growth rate in petroleum consumption has been truly breath-taking.  Consumption was 0.58 bby in 1982.  It took 13 years, 1995, to double.  Then, in less then 9 years, 2004, it doubled again.  If my logistic equation best fit (red line) were to accurately model future consumption, then consumption would double again in 12 years, in 2016, to 4.6 bby and then double again to 9.4 bby in 2030. 

For reference, according to the BP review, the US’s consumption rate was 6.9 bby in 2011.  But, as I pointed out in Part 6 of this series, North America’s (NA) consumption rate is in decline, and that includes declines in US consumption.  So, if the trends in the US CH and were to continue, and the oil export were available, it is not to hard to see how CH could overtake the USA in consumption be the early 2020s.  Indeed CH could overtake all of NA by the mid-2020s, under this scenario.  I think this this type of extrapolation are what causes the QECD and The Economist to make the predictions that I outlined above, that CH would soon overcome the US in oil consumption and economy (e.g., GDP).

I think such scenarios are a fantasy however. 

The problem with this type of scenario is revealed by the size of the solid green line in FIG. 39 going forward—this is the predicted net imports of petroleum that CH would have to have to provide the projected consumption rate, as represented by the solid red line.  In 2006, CH’s imports of about 1.3 bby were about equal to CH’s domestic production rate in that year.  By 2011, imports exceeded 2 bby, while domestic production was 1.5 bby.  By 2020, CH’s imports would have to double to 4 bby and domestic production increase to 1.7 bby, to support the projected consumption rate.  Actually, the imports would have to increase by more than 4 bby, since CH still exports petroleum to other regions, and, the trend is for these exports to increase going forwards. 

Unfortunately, the scale CH’s projected imports and domestic production are not on trend to provide this level of petroleum for domestic consumption.   Production, the blue line is only gradually increasing, and so the bulk of petroleum to support the projected increase in consumption would have to come from increased net imports. 

Let’s look at CH’s predicted exports and imports trends in detail. 

Predicting Petroleum Export Rates from CH to other Regions

Figure 40 shows the relationship between petroleum production rates and export rates for CH, as already worked out in my previous study from a few months ago.   This figure is the same as Figure 8 in Part 2 of “Relationship between Petroleum Exports and Production.”

As illustrated, CH’s total exports (black Xs) are only about 10 percent of CH's total production, but, there is a positive trend (solid regression line, r²=0.44) for an increasing proportion of domestic production to be exported.  Within that overall increasing trend, CH’s exports to NA and JP are going down, and, exports to the remaining Asia-Pacific region (rAP) and South America (SA) are going up.  By far, most of CH’s exports goes to it near neighbors in the rAP, and as discussed in my previous series in Part 2, most of these exports are petroleum products exports.  

Figure 41 shows the predicted absolute regional exports from CH to the other regions, based upon the combination of the production rate trends shown in Figure 39 and the export trend lines shown in Figure 40.

According to this prediction scenario, CH’s exports will steadily increase, going mostly to rAP and SA, and to much lesser extents, EU and AF, while exports to NA and JP are already over.

Predicting Petroleum Import Rates to CH from other Regions

Figure 42 shows the sum (black line), and individual import contributions, predicted for each of the other eight regions, to CH.

As already discussed in the earlier parts of this series, exports to CH from ME, FS, AF, SA, and even NA and JP, are all trending upwards.  These trends are reflected by the rapid increase in CH’s total imports increasing from 0.5 bby in 2000 to about 2 bby in 2010.  This is predicted to continue, until production from CH’s major suppliers, AF, FS, rAP, ME, and SA all eventual peak and decline, and along with it, declining exports to CH.  According to this prediction scenario, total imports to CH peak at about 2.5 bby in 2018 and decline thereafter.  There is a pretty broad plateau from about 2013 to 2024, where imports stay above 2.3 bby, but then starts to decline especially as exports from ME to CH go into decline.

Of course, CH’s net imports (imports minus exports) will by less than these amounts, since as discussed in the context of Figure 41, CH domestic exports are predicted to increase over this period.   

Predicting Consumption Rates for CH based on the PIE analysis

I applied my normalization to CH in the same manner as done for NA, SA, AF, EU and JP.  For CH, the average calculated consumption rate, based on the summation of production plus imports minus exports for the 2001-2011 time range, was 0.038 ± 0.076 bby lower than the reported consumption rate for CH as reported in the BP review (interestingly, this is about the same normalization applied to JP’s data).  Therefore my normalization for CH consisted of adding 0.038 bby to the predicted future consumption rate and adjusting total net exports downwards by this same amount.  And, like the other regions, I did not attempt to distribute this correction proportionally among the individual absolute exports and absolute import to and from each of the other regions.

Figure 43 shows the production, consumption and net export data, and corresponding best fit curves, the later two now shown as dashed lines.  Added is the predicted net export (light green solid line representing total absolute exports minus total absolute imports with the -.038 bby correction) and consumption (blood red solid line) rate prediction curves, based on my PIE analysis (exports minus imports with the 0.038 bby correction). 

The results presented in Figure 43 suggest that, if CH’s production rate follows the trend predicted by the logistic equation best fit (solid blue line), and CH’s export and import rates continue along the trend lines shown in Figures 41 and 42, respectively, then the predicted total net export rate curve (solid light green line) reaches a peak negative value of about -2.2 in 2017, corresponding to peak net imports, after which, net imports start to decline. 

CH’s projected slowly increasing domestic production rate causes CH’s consumption rate to peak a few years after the import peak—at about 3.82 bby in 2020. 

That peak consumption rate of 3.82 bby is only about 7% higher than CH's consumption rate of 3.56 bby in 2011.  This would imply a much milder growth rate in petroleum consumption over the remainder of the decade, about 1%/yr, than seen in the past decades.   

The predicted decline in consumption rate in the first decade after 2020 is comparatively mild—about an -11% decrease to 3.4 bby by 2030.  The decline rate picks up steam after that (as imports from ME go into faster decline), declining to 72% of the peak by 2040 and then to 57% of the peak by 2050.  If these predicted production and consumption rate trends continued, then CH’s consumption rate and production rate would cross-over again in about 2049, making it possible for CH to become a net exporter, or alternatively, maintain its consumption rate for a time at about the same level it was at in the mid 2000s.

Summary & Conclusion

My last three posts, discussing petroleum consumption trends in North America (Part 6), the European Region (Part 7) and Japan (Part 8), all illustrate how, over the last decade, exports from the Middle East and other net-exporter regions to these three regions have been going down. 

In the present “zero-sum world,” as Jeff Rubin coins it, it is mainly the decline in exports to these three regions that has supported increased exports to China, and as you will see in the final post of this series, to the remaining Asia-Pacific regions.   

Zero-sum in this context is fairly accurate in the case of the Middle East and South America, because their net exports have been fairly flat over the past decade (see e.g., Part 2 and Part 5 Figures 1 and 17, respectively, green circles).  For other net exporters, like the former Soviet Union region and Africa, however, this is not the case, as net-exports from these regions actually increased.  But I do not expect this increase to continue.  Rather, I expect that exports from the former Soviet Union and Africa will decline as these region's production rates decline. 

The good news for China is that the trends for continued increases in domestic production and imports, even while slightly increasing their petroleum product exports, will make it possible for China to have continued real economic growth, possibly up to the end of the decade--unlike North America, the European Region and Japan.

After 2020, however, the picture looks less rosy for China, as it’s main suppliers of oil start to go into production and export decline.  This probably means that China’s economy will become stagnant in the 2020s and then decline thereafter.  Even then, the predicted declining consumption rates in China of -1.1 %/yr from 2020 to 2030 or -1.4%/yr from 2020 to 2040, and, the possibility of a flattening consumption rate after that (e.g., due to increased domestic production, perhaps from the East China Sea and Western China), suggest a much milder decline scenario than what the decline trends look like for Japan (-5.2 %/yr), Europe (-3.2 %/yr) or North America (-2.2 %/y) all of which are on-going presently, and, will likely continue for the rest of the decade and beyond.   

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Next time, I will cover the final region in my 9-region analysis: the remaining Asia-Pacific region.