Saturday, April 14, 2012
In Part 1, I introduced my abbreviations, data bases and analysis methods, Part 2 presented the global trends, Part 3 presented the inter-regional trade movements to and from North America and Part 4 presented inter-regional trade movements to and from South America, and Part 5 presented the same for Africa.
Up to now in the series, part 2 revealed that 2007 was the peak in the total global pool of petroleum involved in inter-regional trade movements (i.e., imports and exports between any of nine regions: North America (NA); South America (SA); Europe (EU); former Soviet Union (FS); Middle East (ME); Africa (AF); China (CH); Japan (JP); Asia-Pacific remainder (APr)). Now, as we proceed along to downside of a diminishing petroleum export pool, what are the trends suggesting how the remaining petroleum will get distributed between these nine regions?
In part 3, we saw a trend for diminishing imports to North America, especially from South America, and the Middle East, with Africa and the Former Soviet Union picking some but not all of the slack. Exports, particularly petroleum products, from North America, to South America and
Europe, having been rising. In part 4, we saw that those diminishing South American exports to North America were essentially being diverted to China, the other Asia Pacific countries (but not Japan) and to Europe. Part 5 showed that Africa’s exports of petroleum to Europe were declining with North America and China receiving the benefit of increased exports from Africa. Africa’s imports of petroleum, mostly crude oil, from the Middle East have dropped, while imports of petroleum products from Europe have increased.
So, with exports of petroleum from Africa to Europe declining, besides South America, has Europe been able to pick up the difference from anywhere else? Da.
Figure 1 presents EU’s total petroleum consumption rate (i.e., both domestic and imported petroleum) since 1980 as reported by the EIA or BP review (solid red circles and squares, respectively).
Figure 2 shows EU's total petroleum production rate (i.e. domestic production, solid blue circles and squares for EIA and BP data, respectively) and crude oil production (solid purple circles).
Note the 1/2 vertical scale in Figure 2 compared to Figure 1, which shows that EU is a very large net importer of petroleum. While it consumed 5.5 bby in 2010, EU only produced 1.6-1.7 bby, depending on whether you use the EIA or BP review numbers. That means EU only produced about 30% of what it consumed—the other 70% had to be net imported from countries outside of EU. In comparison, from part 3, NA produced 5.4-5.9 bby, depending on whether you use the EIA or BP review numbers, which is about 63-69% of the 8.5 bby NA consumed. That means NA net imported 37-31% of what it consumed from countries outside of NA.
I hear lots of main-stream media talk about NA’s, specifically
’s, dependence on “foreign oil,” but EU is relatively far more dependent on inter-regional, or distant foreign oil than NA is. USA
And the situation is getting worse each year, as it is quite clear that EU’s petroleum production has been in decline ever since EU fell off a several year “undulating plateau” in production rates starting in about 2002. The crude oil production rates (purple circles) pretty well mirrors this same trend and in 2010 it was back down to the same rate, 1.4 bby, it was at in 1983.
Figure 1 also shows EU's gross and inter-regional imports of total petroleum, crude oil and petroleum products. The EIA import data (open circles) only runs from 1984 to 2009 while the BP review import data (open squares) only run from 2000 to 2010. The same applies to the export data in Figure 2.
EU shows signs of a peak in gross total petroleum imports in 2006 and inter-regional total petroleum imports around 2007-2008.
It seemed curious to me that EU’s gross imports of petroleum (open red circles) actually exceeded total petroleum consumption (solid red circles or squares), and I had to go back and double check.
But, I have to keep in mind that the gross imports, derived from the EIA’s data, is the sum of all imports for all the countries in the EU region. That includes both inter-regional imports, from countries outside of EU, and intra-regional imports, between countries within EU. The intra-regional import number must be quite large, around 2 bby. Effective this is saying that most of the petroleum produced in EU (e.g., Norway, The Netherlands, UK) stays in EU by getting distributed to the relatively low-producing countries (e.g.,
Sweden, France, ). Germany
Figure 2, which shows EU's gross and inter-regional total petroleum, crude and petroleum products exports is consistent with this: the gross exports (open blue circles or squares) well exceeds total production (solid circles). Also notice how large gross product exports (green circles)—this component of exports alone actually exceeded total production in the last five years. In comparison, the interregional exports of total petroleum or petroleum products (blue and green squares, respectively) are much smaller. Again this implies that the bulk of production within EU and imports into EU got distributed as intra-regional exports within EU.
Figure 3 shows EU's total petroleum, crude oil and petroleum product imports relative to the respective gross and inter-regional global petroleum import pools.
The declining trends in both gross total, crude oil and produce imports (open red, brown and green circles) is pretty obvious. The inter-regional imports of these quantities (open red, brown and green squares) has been pretty flat, except for 2009 and 2010 which show a sharp decline in total imports, due to a decline in crude oil imports.
Figure 4 shows EU's exports relative to the respective total gross and inter-regional global petroleum export pools, which, of course, is about the same as the global import pool. As have noted in the past, similar to the imports trends shown in Figure 3, these relative export amounts are expressed as a percentage of the total gross export pool and the total inter-regional export pool, and, these total pool sizes are different: e.g., 23 bby of gross exports in 2008 versus 17.1 bby inter-regional exports in 2008.
Figure 4 has a one-half vertical scale as Figure 3 because EU’s contributes a smaller amount of petroleum into the global export pool than it imports from the pool—that is, EU is a very strong relative net inter-regional importer; a larger importer than NA, for example.
EU’s gross and inter-regional exports are on a long-term down-trend; the inter-regional total petroleum exports (blue squares) are drop about 20%, from 5.1% of the total export pool in 2000, to 4.1% of the total export pool in 2010. The inter-regional decline is due to the decline in crude oil exports (open brown squares); in comparison, petroleum product exports (open green squares) have actually increased slightly from 2.2% in 2000 to a peak of 3.7% of the total export pool in 2008, but drop to 3.3% in 2010. Those product exports are not too important globally, but they are important to NA and AF, as I will further discuss below.
But first, let’s spend a few minutes considering the intra-regional import/export situation implied by the EIA and BP review data.
European Intra-regional Export and Import Trends
The difference between the gross and inter-regional imports or exports, shown in Figures 1 and 2, respectively, should correspond to intra-regional trade movements of petroleum. For the reasons presented in Part 3, I think that these differences are only rough estimates of intra-regional imports and exports. But still, I continue to show the differences because these illustrate some interesting trends for each region.
Figure 5 shows the differences between the gross and inter-regional total, crude oils and petroleum product imports, which should equal the intra-regional values for these quantities.
As you can see the difference gross and inter-regional total petroleum imports (red triangles) is relatively large, but declining, about 2.5 bby in 2000 to 1.8 bby in 2010. For instance, this is even larger than the intra-regional imports within North America which was about 1.5 bby in 2010 (see figure 5, part 4).
The trends for the two components of this total, crude oil and petroleum product intra-regional imports, are different. Crude oil intra-regional imports (brown triangles) are in steep decline—this makes sense to me because as seen in Figure 2, crude oil production with EU is in steep decline. In contrast, petroleum product intra-regional imports (green triangles) has stayed fairly flat in the last decade, although there have been large oscillations in the import numbers, between 1 and 1.5 bby, in the last few years
Figure 6 shows the differences between the gross and inter-regional total, crude oil and petroleum product exports, which should equal the intra-regional export values for these quantities.
Figure 6 shows about the same trends as in Figure 5: total petroleum intra-regional exports (blue triangles) are in decline, mostly due to declining crude oil intra-regional exports (brown triangles) with flat petroleum product intra-regional exports (green triangles)
Trade movements of total petroleum between Europe and other regions
Figure 7 show the specific quantities of petroleum, in units of bby, imported by the EU FROM each of the eight other regions. For reference, Figure 7 also shows the sum of EU's total inter-regional petroleum imports from all eight of the other regions (black "Xs"), which is the same as presented in Figure 1 (red open squares).
Figure 8 shows petroleum exports from EU TO each of the eight other regions and again for reference, I show EU’s total exports (black “Xs” corresponding to the blue squares in Figure 2). Note the much smaller vertical scale as compared to Figure 7, illustrating the EU is a larger net importer of petroleum.
The black X’s in the figure show that EU's total inter-regional exports have stayed relatively small and flat between 0.7 and 0.8 bby. By far the bulk of these exports, mostly petroleum products, have gone to NA, although the trend is for declining exports to NA in favor of increased exports to AF, rAP and SA. For instance, in 2010 0.53 bby, or 74% of EU's total exports went to NA, but by 2010, the exports to NA were down to 0.37 bby, or 53% of EU's total exports.
Figures 9 and 10 present the same data as shown in Figures 7 and 8, respectively, but expressing EU's petroleum imports or exports, to or from each of the eight regions, as percentages of the total global inter-regional petroleum import/export pool ( global inter-regional imports and exports are the same) . For reference, I also show EU’s petroleum imports and exports as percentages of the global petroleum import/export pool (“Xs” right vertical axis; note the different scale).
Additionally, I have taken all of these data and made linear extrapolations of the 2000 to 2010 data (via linear regression analysis) out to 2021.
Figure 9 shows the import trends discussed in the context of Figure 7: increasing amounts of petroleum imports from FS, decreasing imports from ME and slightly declining imports from AF. The trends for imports NA and SA are obscured at the bottom of the figure, but, the trend is for slightly increasing imports from both regions, but not enough to make up for the declining imports from AF.
The linear extrapolation of the trend for the ME (r2 = 0.95), if continued forward, suggests no imports from the ME by about 2019.
Figure 10 shows the export trends discussed in the context of Figure 8: declining exports from EU to NA, and, increasing exports from EU to AF and the mysterious “UN.”
UN does not stand for United Nations, but rather, the BP review defines this as “Unidentified,” and states that this includes “changes in the quantity of oil in transit, movements not otherwise shown, unidentified military use etc.” for most regions this is very small, but for EU this rises above the baseline. For instance, in 2010, exports from EU to “UN,” about 0.08 bby, amounted to about 0.5% of the global export pool. Somewhat interesting, but I have no way to further account for this "UN." My speculation is that this probably corresponds to some of EU’s large amount of intra-regional exports which can’t be specifically accounted for as such.
Figures 11 and 12 show the relative changes in EU's import sources and export destinations, respectively, as a percentage of EU's total exports or imports in the years 2000 and 2010, and, as predicted in 2021, from the linear regression trend lines shown in Figures 9 and 10.
Figure 11 illustrates the trends for increased imports from FS and the steep decline in imports from the ME. In 2000 the ME was providing 35 percent of EU’s imports, and by 2010 that number was down to 20 percent.
A continuation of that trend will mean that ME is no longer a import source to EU by 2021. Instead, EU would be heavily dependent for petroleum imports from FS, which of course in mainly
. In 2010, EU got 30% of its imports from FS, which is 5% less than from ME. By 2010, FS was EU’s main import source, providing just under 50% of EU’ petroleum imports. Continuing that trend via linear regression (r2=0.78) suggests, that by 2021, EU would be getting 77% of its imports from FS, and another 17% from AF (with NA and SA each providing another 5% each). Russia
Figure 12 illustrates how EU’s petroleum export destinations are moving away from NA and towards AF, and to lesser extents, rAP and SA.
In 2000, 74% of EU’s exports went to NA, but by 2010, that was down to 53%, and, a linear extrapolation of this trend (r2=0.83) suggests that only 13% of EU’s exports would go to NA, with the bulk, 38%, going to AF, and another 13% and 14% going to SA and rAP, respectively.
Summary and Conclusions
Europe’s petroleum production has been in a strong decline since 2002, and presently, only equals about 30% of
Europe’s petroleum consumption. Despite fairly steep declines in production, Europe’s consumption of petroleum has changed little in the last decade. Consequently, Europe has to import 70% of the petroleum that it consumes, which is relatively more than what North America imports. With continuing declines in petroleum production, Europe will have to import ever-increasing amounts of petroleum. The startling trend (shown in Figures 9 and 11) is that Europe has looked increasingly to the former Soviet Union countries as its primary source of imports. Indeed, in 2010, roughly 50% of Europe’s inter-regional imports came from the former Soviet Union countries, up from 30% in 2000. If the last decade’s trend continues, then we might expect 77% of Europe’s petroleum to come from former Soviet Union countries alone by 2021. However, total inter-regional petroleum imports to Europe peaked in 2007-2008, at about 5 billion barrels per year, and, imports were down to 4.4 billion barrels per year by 2010 (Figure 1), mainly do to a long-term trend of declining imports from the Middle East.
If I were a European, I would be worried about these trends. It is bad enough to be 70% and counting dependent on truly, “foreign (i.e., inter-regional) oil,” but to be so dependent on a former cold war nemesis is even worse. Is it too far-fetched or paranoid to imagine how the former Soviet Union countries, particularly Russia, could use petroleum imports as political leverage to influence and divide the domestic and foreign policies of the highly oil-dependent countries in Europe to its advantage?
And, going forwards, what would happen to European consumption if exports from the former Soviet Union countries to Europe start to decline, e.g., because the former Soviet Union country’s petroleum production starts to decline, and/or former Soviet Union countries find more lucrative destinations (i.e., China, Japan or the remaining Asia Pacific countries) to export their petroleum to? Europe is not a good example of having multiple, flexible sources of petroleum to import from.
Next time, I head south again to examine the
Middle East’s petroleum Export and Import Trends.