Wednesday, April 25, 2012

Part 7: Inter-Regional Trade Movements of Petroleum to and from the Middle East

I could rant about how Google’s “upgrade” to blogspot as an example of a devolving civilization, but instead, let’s just get on with the series.  

In the context of discussing other regions, I have talked a lot about the Middle East (ME).  In Part 3, we saw seen prominent diminishing exports from the ME to North America (NA), and the same trends of diminishing exports to South America (SA), Africa (AF), and Europe (EU), in Part 4, Part 5, and Part 6, respectively. 

Where has that Middle East petroleum been going to, or, is this just part of an overall trend of there simply been less exports of petroleum out of ME?  As you will see, ME’s total inter-regional exports of petroleum have only slightly declined, but those exports are being diverted to some parts of Asia. 

The Middle East's Total Petroleum and Crude Oil Production and Consumption Trends
Figure 1 presents ME’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). 

Both the EIA and BP data set illustrate the long-time increase in ME’s consumption of petroleum, and, as I showed over a year ago, this consumption rate data, when fit the Hubbert Equation, suggests a yearly growth rate in consumption of 5.6 percent per year. 

Figure 2 shows ME's total petroleum production rate (i.e., the entire region’s domestic production, solid blue circles and squares for EIA and BP data, respectively) and crude oil production (solid purple circles). 

Note the ~3 times larger vertical scale in Figure 2 as compared to Figure 1, which just illustrates that ME is a very large net exporter of petroleum. 

What I find most striking about Figure 2 is that the ME’s production (solid circles and squares) has pretty well “flat lined” at about 9-9.5 bby since about 2004-2005 (again, depending on whether you take the EIA or the BP numbers). 

The Middle East’s Gross and Inter-regional Export and Import Trends
Figure 1 also shows ME's gross and inter-regional imports of total petroleum, crude oil and petroleum products.  The EIA import data (open red circles) only runs from 1984 to 2008 while the BP review import data (open red squares) only run from 2000 to 2010.  The same applies to the export data in Figure 2.

As illustrated in Figure 1, the much small magnitude of ME’s gross imports (open red circles) or inter-regional imports (open red squares) illustrates that ME’s increasing consumption is being fed from within.  That is, ME has been increasingly consuming it’s own petroleum production.  For example, in 2010, of the 2.6-2.8 bby of petroleum consumed by ME (depending on whether you take the EIA or the BP numbers), only 0.16 bby came from imports from outside of the region, although it looks like there is an up-trend in the inter-regional and gross imports.  Still the amounts are very small. 

As illustrated in Figure 2, during the past several years of the ME’s flat-lined production, inter-regional exports (open blue sqaures) have slightly declined, e.g., from 7.4 bby in 2005 to 6.9 bby 2010, no doubt to help feed the increased domestic consumption.   

Another interesting thing about Figure 2 is that it shows that ME has relatively low petroleum product exports: only about 0.8 bby (open green squares) compared to crude oil exports of 6 bby (open brown squares).  This suggest to me that ME doesn’t have much excess capacity to refine its own crude oil into more lucrative petroleum products from exports.

Figure 3 shows ME's total petroleum, crude oil and petroleum product imports relative to the respective gross and inter-regional global petroleum import pools. 

As one might expect, the ME’s imports relative to the total global import is very small—total gross imports (red circles) of only about 2 to 3 percent of the total global pool and total inter-regional imports (red squares) of less than 1 percent of the total global pool, although there is an up-trend in inter-regional imports over the past decade.

Figure 4 shows ME'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.  

Note the order-of magnitude larger vertical scale of Figure 4 compared to Figure 3, signifying the ME’s important role as a major petroleum exporting region,  In 2000, about 50 percent of all inter-regional global exports (blue squares), mostly crude oil (brown squares), came from ME.  But, by 2010, only about 41 percent of global inter-regional exports came from the ME.  This suggests to me that the ME’s role as the key contributor to the petroleum export pool is in decline. 

As suggested by Figure 2, the decrease in the relative importance of the ME as an export source was not due to a decline in absolute rates of petroleum production.  As also noted in the context of Figure 2, there has been a slight decline in absolute export rates, but not enough to totally explain the 9 percent difference from 2000 to 2010.  I suspect that it is increasing exports, mainly from the former Soviet Union region (FS), which in turn, has expanded the total global export pool, also helps explains the declining relative importance of the ME as an export source.  But that’s a story for another day.

Middle East 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 they illustrate the intra-regional 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 between gross and inter-regional total petroleum imports (red triangles 0.3-0.4 bby) is about 3 to 4 times larger than the inter-regional imports (0.07 to 0.16 bby; Figure 1: open red squares).  This suggests that there are more intra-regional imports than inter-regional imports.  Probably, the intra-regional imports involve the movement of petroleum (notice how petroleum products green trianlges are up over the last decade) to those countries in the ME region that don’t produce substantially amounts of their own: Israel, Jordan, Lebanon, Palestine (see e.g., Survey of Oil Exports from the Middle East). 

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 the same trends as in Figure 5, but with wild fluctuations—intraregional exports (blue triangles) on the order of 0.2 bby.

Trade movements of total petroleum between the Middle Esat and other regions
Figure 7 show the specific quantities of petroleum, in units of bby, imported by ME FROM each of the eight other regions.  For reference, Figure 7 also shows the sum of ME'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).

The total inter-regional petroleum imports, the black X’s, illustrate that ME's imports from the other regions is slowly rising, e.g., from 0.07 bby in 2000 to 0.16 bby in 2010. 

But, the BP review’s summary of inter-regional imports does not provide the break-down of inter-regional imports from the individual regions, probably because the import contribution from individual regions is below their reporting cut-off, which is probably about 0.01 bby. 

Figure 8 shows petroleum exports from ME TO each of the eight other regions and again, for reference, I show ME’s total exports (black “Xs” corresponding to the blue squares in Figure 2).  Again note the much larger vertical scale as compared to Figure 7, illustrating the ME’s role as a large net exporter of petroleum.

The black X’s in the figure illustrate that, over the last decade, although there is a down-trend  relative to the total global export pool, the ME's total inter-regional exports have stayed fairly flat at about 7 bby.  The top export destination of the ME’s exports during this period are the remaining Asia Pacific region countries (rAP; brown circles), that is, the countries  in the Asia Pacific other than Japan (JP, golden triangles) and China (CH, pink circles).  JP and CH are separately accounted for in figure 8.  In 2010, rAP received 3 bby of the ME’s 7 bby in exports, which was more than double than JP’s 1.3 bby and CH’s 0.9 bby.  These three, rAP, JP, CH—totaling 5.2 bby—were the number one, two and three export destinations for the ME’s petroleum.  That corresponds to nearly 74% of all of the ME’s petroleum exports going to these Asian destinations. 

In 2000, CH only got 0.26 bby, or 3.7 percent, of ME's petroleum exports, but by 2010, that was up to about 13 percent of ME's exports.  Similarly, rAP received 2.3 bby, or 33 percent, of ME's exports in 2000, but by 2010, that was up to 43 percent.

It is pretty clear that these increases to CH and rAP over the last decade are at the cost of declining exports mainly to EU, NA and JP.

In 2000, EU and NA were the number three and four import destinations, respectively, for the ME’s exports. For instance, in 2000, ME's exports to EU and NA were 1.4 and 1 bby, respectively.  That total of 2.4 bby equaled about 35 percent ME’s petroleum exports in that year.  But, by 2010, EU and NA together were only receiving 1.5 bby or 22 percent of ME's exports.  During the last decade, exports to JP have declined as well: from 1.5 bby or 22 percent in 2000 to 1.3 bby or 19 percent in 2010. 

Since ME's total exports have not changed much during the decade these trends for declining exports to EU, NA and JP, and increasing exports to rAP and CH, are a clear transfer of the ME's petroleum wealth away from the EU, NA and JP,  regions and towards these two developing Asian regions.

Figures 9 and 10 present the same data as shown in Figures 7 and 8, respectively, but expressing ME'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 ME’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, like Figure 7, is not much of a story, because imports from the other eight individual regions are not reported in the BP reviews.  There is a trend for the ME’s total inter-regional imports to be slowly increase at a rate of 0.01 bby (slope, r2=0.81).
Figure 10 more clearly shows the export trends as discussed in the context of Figure 8, but now as the percentages relative to the ME's total exports in any one year. 

Some additional aspects of the export trends which are brought out better in this figure are the ME's export down-trends to South America (SA) and Africa (AF).  The linear regression trend line (r2=0.76) predicts zero exports to SA by 2012, and a slower, less certain, decline in exports to AF (r2=0.5) to 1.3 percent by 2021. 

If the trends for declining exports continue, then by about 2019, EU will no long be receiving any of the ME's petroleum (trend line r2 = 0.95).  NA would only be receiving about 2 percent (trend line r2 = 0.9) by 2021, and, JP would be down to 14 percent (trend line r2 = 0.98) of the ME's petroleum exports by 2021. 

In contrast, by 2021, about 61 percent of the ME's exports would go to rAP (trend line r2 = 0.6) and about 27 percent would go to CH (trend line r2 = 0.93).  Note, these extrapolated percentages don't add up to 100—that's because the linear extrapolations for EU and SA both go into negative territory before 2021.   But normalizing for this (e.g., by setting all subsequent years to zero after 2018 and 2012, respectively) wouldn't change the above percentages by very much.

Figures 11 and 12 show these percentage changes in ME's import sources and export destinations, respectively, as a percentage of the ME'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.

Again there is no story in Figure 11, because the ME's imports of petroleum from the individual other eight regions is very small.

I decided to present two different perspective views for Figure 12, to more clearly show the regional export trends.  As you can see in Figure 12a, exports to NA, SA and EU are all down steeply, while exports to rAP are up strongly.  As illustrated in Figure 12b, exports to JP and AF are trending down and exports to CH are up strongly. 

Summary and Conclusions
The Middle East's petroleum production rates have be quite flat over the past 6-7 years, and this is likely a sign of reaching peak production (Figure 2).  The Middle East's petroleum inter-regional export rate has been flat over the last decade (Figure 2).  Expressed as a percentage of the total inter-regional export pool, however, the Middle East's relative contribution to the export pool has declined (Figure 4), and, domestic consumption rates are continuing their long-term increase (Figure 1). 

The decade long constancy of the Middle East's total petroleum inter-regional exports, however, provides no hint of the large change in the export destinations for this petroleum over the past decade.  There has been a large shift in the Middle East's exports away from the Western regions: North America, Europe, South America and Africa, as well as Japan, and, towards the East, specifically China and the remaining Asia Pacific countries.  In 2010, about 74 percent of the Middle East's petroleum exports went to the latter three two  regions, and the trend is for this to increase going forwards.

If one of the goal's of the West's military interventions into the Middle East (i.e., Gulf War I and II), were largely about safe guarding a steady flow of Middle Eastern oil for the benefit North America and Europe, as some in the know have speculated, then this strategy has substantially failed, as illustrated by the trends in Figure 10 and 12.  It would seem that, even without Saddam Hussein controlling the Middle East, the flow of oil has shifted away from the West and Japan and towards China and the remaining parts of Asia.  If the present trend continues, in a decade's time, the Middle East will be a relatively minor supplier of oil to the West and the major supplier to these Asian regions. 
Next time, I will describe the former Soviet Union’s petroleum Export and Import Trends. 

4-26-2012: Correcting my typo: the 74% refers to exports to the latter three: China, Japan and remaining Asia Pacific region

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