Sunday, October 28, 2012

Predicting Global and Regional Petroleum Consumption Trends Part 7: Europe

No lengthy introduction, just the analysis results.  I have one reminder: the term EU as used herein refers to Europe, or European Region, as defined in the BP review, and not European Union.

I refer readers to Part 1 for an introduction to the data bases, methods, abbreviation and definitions used in this series.

Europe’s production, consumption and net export trends: an ELM analysis
Figure 29 presents the reported 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) best logistic equation best-fit curves (solid lines with the same respective colors). 


Production rates in EU follow two distinct trend periods, which I modeled using two separate logistic equation fits to the BP review data for 1965-89 and 1990-2011, respectively.   Consumption rates in EU were modeled using two logistic equations fits to the data from 1965-82 and 1983-2011, respectively.

The best fit parameters of Qo, Qand the rate constant "a" are summarized in Table 7 below:

Table 7 summary of best fit parameter for production and consumption for EU

Qo (bbs)
Q∞ (bbs)
a (yr-1)
Production 1965-89
Production 1990-2011
Consumption 1965-1982
Consumption 1983-2011

As illustrated in Figure 29, EU’s annual production rate has been in steady decline since peaking at 2.54 bby in 2000.  For instance, in 2011 production rates were 1.47 bby—a 42 % decline in 11 years, or, -3.8 %/yr.  Of course, this reflects the continuing decline in petroleum production from the North Sea, mainly from Norway, UK and Denmark. 

The last two years of EU’s consumption rate has dropped more steeply compared to the early data.  Therefore the NLLS best fit to the consumption data for 1983-2011 suggests consumption declining more steeply than the comparable analysis in Estimating the End of Global Petroleum Exports, Part 3, using the BP review data up to 2009.  It looks like EU’s consumption rate peaked in 2006 at 6 bby.   In 2011, the consumption rate was 5.4 bby—a 10% drop in 5 years. 

The net export implication of these NLLS fits is represented by the difference curve shown as the dark green line: because domestic production is declining more steeply (e.g., about -3.8%/yr) than consumption (e.g., about -2%/yr), exports to EU would have to increase substantially in order to accommodate the gentle downwards red consumption rate curve. For instance, according to this ELM analysis, to support a consumption rate of 5.2 bby, EU’s net petroleum imports would have to be about 4.6 bby by 2018.  With an estimated production rate of only 0.81 bby in 2018, that means that 88% of Europe’s petroleum consumption would have to be imported.   That’s a substantial increase in the already high 72% of Europe’s petroleum consumption coming from imports in 2011. 

Unfortunately, EU’s recent petroleum import and export trends do not support such a scenario at all.  Rather, the triple combination of increasing petroleum exports from EU to other regions, decreasing petroleum imports to EU and decreasing domestic petroleum production rates, suggests a steep decline in consumption rates over the coming decades.    

Predicting Petroleum Export Rates from EU to other Regions
Figure 30 shows the relationship between petroleum production rates and export rates for EU, as already worked out in my previous study from a few months ago.   This is actual the same as Figure 3 in Part 1 of “Relationship between Petroleum Exports and Production.”

The proportion of EU’s total exports, expressed as a percentage of production (black Xs, rhs scale), is surprisingly large and growing larger.   Total exports are increasing at 1.7 %/yr (solid black line r2=0.88).   For instance, in 2000, exports corresponded to 28 % of total production—and by 2011 that number was up to 51 %.  Extrapolating this trend out to 2040 gives the surprising, and probably unrealistic result of 100% of EU's production being exports, although by, then EU’s domestic production is close to zero (0.03 bby according to the blue line in Figure 29).   

What is going on here—why would a region like EU, whose domestic production is in such steep decline, continue to export ever-increasing proportions of its petroleum to other regions?

As I illustrated in Figure 8 of “Part 6: Inter-Regional Trade Movements of Petroleum to and from Europe,” it is not so much that EU’s absolute exports have increased over the part decade.  Rather,  the absolute amount of exports have stayed about the same, during the steep decline in absolute production rates. Consequently, exports, as a percentage of production, has increased, as shown in Figure 30.
Still, why maintain your exports in the face of steeply falling production? 

A clue to the answer lays in the fact that, as pointed out in Part 1 of “Relationship between Petroleum Exports and Production,” the proportion of EU’s exports as petroleum products has been increasing.  Apparently EU has found value in processing its own crude oil production, and probably some of its crude oil imports, and re-exporting a portion of this, as petroleum products, to other regions.   So then, could EU, by 2040, be exporting more than it products?  Yes, maybe, if like Japan, it can still import crude oil, convert that imported crude into to petroleum products, use some of these products domestically, and the re-export the rest (see analysis for JP to follow in Part 8).    

Looking at the individual export destinations for EU’s exports, NA is the primary destination, although this export trend seems to have turned around sharply after 2007, giving a flattening trend.  The recent decline in exports to NA is counteracted by sharp increases in exports to AF (r2=0.75) and rAP (r2=0.56), with smaller trends for increases in exports to SA and JP. 

Figure 31 shows the predicted absolute regional exports from EU to the other regions, based upon the combination of the production rate trends shown in Figure 29 and the export trend lines shown in Figure 30.

Going forwards, despite exports rates, as a proportion of production, going up as shown in Figure 30, the trend is for absolute exports to go down.  That is, EU’s sharply declining production rate swamps out the increase export rate tread in the long run.  Therefore, assuming these trends hold, absolute exports to NA will go down steeply over the next two decades, and exports to AF, rAP and SA will also decline but not as fast the decline in exports to NA.  Still, after 2030, EU’s exports are predicted to be quite minimal at about 0.1 bby, mainly due to EU minimal production rate at that time. 

Predicting Petroleum Import Rates to EU from other Regions
Figure 32 shows the sum (black line), and individual import contributions, predicted for each of the other eight regions, to EU.

Like NA, EU has a several times disparity between the total amount of petroleum exported (e.g., about 0.8 bby in the mid-2000s) and the total amount imported (e.g., peaking at about 4.8 bby in 2008).  In fact, you might by surprised that absolute petroleum imports into EU are about 1 bby higher that absolute imports into NA (comparing Figure 32 to Figure 27 in Part 6).  

Unlike NA, however, EU’s domestic production rate has been steeply declining for over a decade.  Moreover, as illustrated in Figure 32, imports from two of EU’s biggest three suppliers have gone down (ME, bright blue line), or, have plateaued (AF, brown line) over the last decade.  And, exports from ME and AF to EU are predicted to steeply decline over the next decade.  

As I showed in Part 2 of this series (Figure 2 and 3) over the last decade, ME's petroleum exports overall have been in decline, and, these declining exports have been shifting away from NA, EU and JP towards rAP and CH.  Moreover, over the coming decades, exports are predicted to further decline, as ME’s production rate declines. 

As I showed in Part 4 (Figure 13 and 14), although AF’s overall exports have trended upwards, exports to EU are flat to trending downwards, and going forwards exports from AF are predicted to steeply decline due to steep declines in domestic production.

It is mainly the increased imports from the FS over the past decade that has prevented EU from seeing an overall decline in its total imports, due imports from ME and AF flatteningg or declining.  However, imports from FS to EU are also predicted to peak in about 2011-2012.  As shown in Part 3, FS has started to shift its exports towards NA and CH, and going forwards, FS’s absolute exports are predicted to decline as it’s domestic production rate declines.  

What this means for EU in the long term are steep declines in imports from its three main suppliers FS, ME and AF.  For instance from 2012 to 2030 EU’s total imports are predicted to decline from about 4.7 bby to 1.4 bby—a 70 % percent decline.   I find it interesting that EU’s imports are not predicted to go to zero mainly because of the long, slow, trend for NA’s production and exports to continue.  For instance, as predicted in Figure 32, NA’s exports to EU eventually overtake FS’s declining exports to EU in about 2035.  This trend might occur earlier if FS, as discussed in Pert 3, FS cuts back its exports in order to delay its own domestic consumption rate from going to zero.  

Predicting Consumption Rates for EU based on the PIE analysis
Well, I imagine that by now, you can see the disaster prediction coming from the “triple whammy” of trends of decreasing domestic production and imports, and, increasing exports.  But let’s go through the numbers.

I applied my normalization to EU in the same manner as done for NA, SA and AF.  For EU, the average calculated consumption rate, based on the summation of production plus imports minus exports for the 2001-2011 time range, was 0.113 ± 0.181 bby higher than the reported consumption rate for EU as reported in the BP review.  Therefore my normalization for EU consisted of subtracting 0.113 bby from the predicted future consumption rate and adjusting total net exports upwards by this same amount.  And, like NA, SA and AF, 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 33 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 plus the +0.113 bby correction) and consumption (blood red solid line) prediction curves, based on my PIE analysis (exports minus imports plus the -0.113 bby correction). 

The results presented in Figure 33 suggest that if EU’s production rate follows the decline trend predicted by the logistic equation best fit (solid blue line), and EU’s export and import rates continue along the trend lines shown in Figures 31 and 32, respectively, then the predicted total net export rate curve (solid light green line) is not going to continue to grow more negative as suggest by the ELM analysis in Figure 29 or the dashed green line in Figure 33.  Rather, EU’s net exports will become increasingly less negative—although they always stay negative.  That is EU looks destined to stay as a net importer. 

PIE analysis predicts a very steep decline in the domestic petroleum consumption rate for EU (solid blood red line)—even steeper than that predicted for NA in Part 6, and much steeper than that suggested by the logistic equation fit to the consumption rate data (dashed red line in Figure 33).  For instance, according to the consumption rate decline predicted by the PIE analysis, EU’s consumption will go from its peak of 6 bby in 2006 to 1.35 bby in 2030—a 78 % decline or -32% per decade or -3.2% per year.  That’s almost 1.5 times steeper that the consumption decline rate of -2.2 %/yr predicted for NA.  

As I pointed out earlier, EU’s annual production rate has been drooping by about -3.8 %/yr and its annual consumption rate has been dropping by about -2 %/yr.  I expect that the consumption rate decline will accelerate when, as discussed above, the imports from FS start to plateau and then decline, and as imports from ME and AF continue to decline.  For instance, the predicted consumption rate for EU shown in Figure 33 (solid blood red line) suggests consumption declining from 5.27 bby in 2011 to 1.26 bby in 2031—a 3.8 %/yr decline rate.  

Final thoughts
This analysis suggest that, even more than North America, Europe’s petroleum consumption rate and therefore its GDP are in for a very steep decline over the next two decades.   If it was hard imagining how North America’s economy could grow in the face of a -2.2 %/yr decline in petroleum consumption, then it is even harder to imagine the same for Europe with a  -3.2 %/yr to -3.8 %/yr decline rate in consumption.  

With a consumption rate of about 5.4 bby and population of about 0.6 billion, Europe in 2011 had a per capita petroleum consumption rate equal to about 9 barrels per person per year (bpy).  Now consider the prediction of a consumption rate of 1.26 bby in 2031 and of 0.8 bby in 2040 (from Figure 33).  This is quite troubling.  Even if Europe’s population just stays about the same, this would mean a per capita petroleum consumption rate of 2.1 bpy in 2031 and 1.3 bpy in 2040, whcih is lower than the 2011 per capita rate of consumption of about 4 to 5 bpy for South America or the former Soviet Union, or, even China’s 2011 per capita rate of about 2.5 bpy.  

At least for North America, there was some suggestion of a light at the end of 20 years, in that it could become a net exporter of petroleum.  This does not seem likely for Europe, because it primary petroleum resource, North Sea Oil, has been in decline for the last decade, and I see no signs in the data of this being mitigated.  If the trends shown in this analysis continue, Europe will become somewhat like Japan, being almost totally dependent upon foreign sources of oil, mainly from the former Soviet Union and North America.  

Next time, I will turn my attention to Japan. 


  1. I know that all of your analyses are based upon mathematics and are very useful as such, but I just can't see North America exporting oil 20 years from now, nor Europe being able to function on one-fifth of the oil it does currently. More likely, your charts will be accurate until the point when the social unrest and chaos resulting from economic collapse causes the export numbers to crash to zero.

    It's funny that though your posts are quite scientific and dispassionate, they scare me as badly as anything I read on Peak Oil around the 'net. Keep up the good work.

  2. Bill, I think that the most likely thing to happen is a continuation of the existing trends, although obviously the farther out one goes, the less reliable the prediction. Personally, I find that performing this kind of technical analysis help to reign-in my own personal biases, and other biases that one hears in the media (including both the uber-doomer and pollyanna biases).

    Yes, maybe this is scarier because it’s harder to just right-off these trends as “crazy talk” when you see the data and analysis up close. And, I fully admit that most folks (especially politicians and economists!!) really don’t want to see this kind of analysis. That’s why I expect this blog to always remain as a small-nitche fringe blog—although I do appreciate your continued linking to it.

    I also agree and fully admit that any number of events could disrupt the forecast trends shown here. For instance, a few times on this blog, once back in 2010 (, and again this summer (, I did posts trying to assess what might happen if the Strait of Hormuz were to close. But here we are in late 2012, with the Strait still open.

    If-when, there is a major popular uprising, or, political or military crisis in one or more of these regions, then, yes these trends will likely change, and probably for the worse. However, perhaps all of the mini-crises we are seeing around the world are a reflection of an “adjustment process” to living with a whole lot less oil and a declining economy.

  3. Hi Crash Watcher,

    I've been following you for a while and I think your analytical skills are outstanding. Now I found and article about election fraud analysis that sounds legit, but I don't have the skills to confirm or disconfirm the information. Could you look into it?

  4. Anonymous, if the GOP had a strategy to “steal” the election in America, then it evidently failed miserably.

    In my opinion, the GOP is fighting against demographic trends that are weakening its traditional base. Here’s a great NY times article, “”The Building Blocks of Re-election,” with tons of charts that illustrate my point:

    In my opinion, until the GOP re-invents itself to address these demographic trends, it will have no chance of winning a presidential election again.

    More pertinent to the post in Part 6, I think that an Obama administration in power for a second term reduces the likelihood that the USA is going to boost its petroleum production along the lines that Mills et al. had hoped for. The Obama administration will also likely kill, or at least delay, the Keystone pipeline project, and, this would tend to lock-in production from the Alberta tar sand, at least until a "Northern Gateway" pipeline across central BC is agreed upon and built, if ever. The bottom line is that I expect North American production to stay at about the same level that it is at now, in accordance with the trend analysis I did in Part 6.


Your comments, questions and suggestions are welcome! However, comments with cursing or ad hominem attacks will be removed.