Sunday, January 27, 2013

Post Peak Oil Economic and Population Scenarios: Part 4 Export Mitigation strategies

Part 1, Part 2 and Part 3 of this series presented my 9-region global survey of the per capita petroleum consumption changes predicted from the population trends, and my predicted petroleum consumption trends from in my previous series, “Predicting Global and Regional Petroleum Consumption Trends” (starting here at Part 1). 
The major premise of this analysis, as discussed in Part 1, is that the current trends in the petroleum production rates, import rates and export rates for each of these 9 regions will continue along their current logistic or linear trend lines, and, that these trends can be summed up to predict what the petroleum consumption rates will be for each of the regions.  The predicted petroleum consumption rate trends, divided by the predicted population change trends, courtesy of the US census bureau, allows me to predict the trend in per capita petroleum consumption rate for each region. 
For reasons already presented in Part 1, I believe that per capita consumption rate is an important indicator of the direction and magnitude of economic growth/de-growth, and, that below a certain low level or per capita consumption (e.g., less than 1 barrel of petroleum per person per year, b/py) the petroleum driven food production system of a region starts to decline, along with a concurrent and proportional an increase in starvation and death in that region.  In particular, my thesis is that that the extent of population decline is in direct proportion to that needed to keep per capita consumption at 1 b/py, until the population drops to its pre-petroleum era population, which I have assumed to equal that region’s population in 1900.
Nine region scenario summary
Table 1 summarizes the predicted annual percent change per capita consumption rate scenarios over three different time ranges, and, the year when a region drop to 1 b/py, or alternatively, that regions per capita consumption rate at the end of my study period in 2065.
Table 1: Regional changes in per capita consumption rate and year to reach 1 b/py, or, rate in 2065
Year to reach 1 b/py or rate in 2065
The Net Exporter Regions
 down to 1.9 b/yp by 2065
 >1 b/py by 2022; ~0 b/py by 2026
 >1 b/py now; ~0 b/py by 2026
 down to 2.5 b/yp by 2065
The Net Importing Developed Regions
 down to 4.2 b/py by 2065
 down to 1.3 b/py by 2040
>1 b/py by 2034; 0.2 b/py by 2040
The Net Importing Developing Asian Regions
 down to 1.5 b/py by 2065
>1 b/py by 2031; >0.2 b/py by 2065
Although all nine regions suffer serious declines in per capita petroleum consumption over my study period to 2065, some regions have much sooner and steeper declines than other regions. 
In the short term, from the present until 2020, CH fairs the best with an overall slight increase and ME is next best off with a very mild declines in per capita consumption.  Next best off is SA with only a -1.3 % decline, followed by rAP with a -2.2%/y decline.  Then there are progressively steeper annual consumption rate declines of -3 to -5 %/y from NA, to EU to JP.  At the bottom are FS and AF.  The annual per capita consumption rate declines of -7 to -8 %/y for AF and FS are extremely large, because of the bad combinations of trends for declining domestic production, increasing export rates and low to zero import rates for these two regions. 
From 2020 to 2040, CH’s per capita consumption rate change becomes negative, ME’s goes more negative, and SA slow decline stays about the same.  The rAP region joins EU and JP with similar steep annual declines in per capita in the -3 to -5%/y range while the decline rate in NA starts to level off to about the same decline rate in ME of -2.3 %/y. 
I highlight the four regions, FS, AF, JP and rAP whose per capita consumption rate decline in 2020 to 2040 drops below my critical level of 1 b/py.  My prediction curves suggested that AF is about at this level now, and that FS will drop below this level in 2022.  Two other regions, rAP and JP, drop below this level about a decade later in 2031 and 2034, respectively.  Notice how close that EU is to this critical level by the end of this time range in 2040. 
From 2020 to 2065 to decline rates for many regions (NA, SA, EU, rAP, ME) are starting to level off compared to the 2020-2040 period but they are stilling falling.  JP has an apparent large percentage increase in per capita consumption mainly due to the prediction of continued imports from NA and because the increase is from a near-zero per capita consumption rate in 2040.  Per capita consumption rates decline in CH is still steep than in the 2020-2040 period.  No other regions drop below 1 b/py, although EU is precariously close at about 1.1 b/py.
Mitigation Scenarios for FS, AF, JP and rAP
As I noted above, the four regions of FS, AF, JP and rAP are at the greatest risk of dropping below my predicted critical per capita consumption rate level where the petroleum fueled food production system becomes compromised, and, starvation and population decline sets in.  
Although one could fantasize about various more pleasant mitigation scenarios, like dramatically increasing domestic petroleum production, massive food production increases, independent of petroleum consumption, massive voluntary population control, etc..., I don’t see signs of any of these things happening in the new 10 to 20 years.  Rather, I expect that the most likely mitigation scenario is that these regions will try to cut their exports of petroleum in favor of domestic petroleum consumption.  Furthermore, I expect that this mitigation effort will start to occur right at the point where the per capita consumption for that region reaches 1 b/py. 
Why do I expect this mitigation measure later, rather than sooner?  That is, why not just start cutting petroleum export rates right now? 
Well, at three reasons, anyone of which would be sufficient: first, lack of recognition of the problem; second, these regions, or at least governments in these regions, rely heavily on the income that their petroleum exports bring in; and, third, humans generally do not act to mitigate a problem, like imminent starvation and death, until it reaches crisis proportions.
In the mitigation scenarios to follow for these four regions, I assume that each of the four regions will not act to cut their export rate of petroleum until that region’s particular per capita consumption rate reaches 1 b/py, and, I assume that the extent of export rate reduction made will only be enough to keep the per capita consumption rate at 1 b/py for as long as possible. 
Of course, once the sum of domestic production plus whatever imports a region gets drops below 1 b/py, my scenario of starvation and population decline sets in anyways.  However, I expect that even putting off mass starvation and death by a few years would seem like a bargain, when the time comes for these regions. 
Okay, let’s see what an export restriction mitigation scenario might do for these four regions.
Export Mitigation scenario for the Former Soviet Union
I’ll spend some extra time here to describe the figures here, and, the reader will understand that all subsequent figures presented for the other regions are in the same format.
Figure 19 reproduces Figure 10 from Part 3 of my previous series, showing the petroleum production, consumption and net export data, and corresponding best fit curves (shown as dashed lines) and the PIE analysis predicted net export (dashed light green line) and consumption (dash blood red line). 
Added to Figure 19 is my mitigation scenario for this region: starting in 2023 when the per capita petroleum consumption reaches 1 b/py, net exports (solid green line) are cut back sufficiently each year to keep the per capita rate (solid blood red line) at 1 b/py for as long as possible.   Eventually, in 2042, as production rates continue to decline, exports cease altogether and per capita consumption drops below 1 p/py.
Figure 20 reproduces Figure 4 from Part 1 of the present series showing the population (blue circles), census’s bureau predicted population (dashed dark blue line) the calculated per capita consumption rate (red circles), my previous PIE analysis predicted per capita consumption rate (dash blood red line), my previous predicted population based on the previous PIE analysis per capita consumption (light blue dashed line). 
Added to Figure 20 is the population consequence for the mitigation scenario:  the per capita consumption (solid blood red line) is kept at 1 b/py until 2042, at which point, production is insufficient even with net export rates at zero.  Consequently, the population drops steeply down after 2042, as per capita consumption drops, until reaching the pre-petroleum era population of 121 million in 2048.
I would classify this as a successful mitigation strategy for FS because it at least postpones the region’s population crash by about 20 years.  Moreover the region is still able to realize the profits from continuing exports (albeit less than the trend predicted from the PIE analysis) until 2042. 
The reason why the mitigation is successful is clear from Figures 19 and 20: FS’s present per capita consumption rate is ~5 b/py, and, FS has enough buffer production capacity to continue positive net exports and still keep per capita consumption at 1 b/py for 20 years.  Consequently, the slow population decline predicted by the census bureau (dark blue dashed line) could be followed for another 20 years before the population crash.
Export Mitigation scenario for Africa
Figures 21 and 22 for AF are completely analogous to figures 19 and 20 above.
Added to Figure 21 is my mitigation scenario for this region: according to my PIE analysis of this region (Part 4 of the previous series and Part 1 of the present series) AF’s per capita petroleum consumption in 2011 was about 1 b/py and therefore export mitigation would need to start right now to keep per capita consumption at this level.  Moreover because AF’s population is still growing at a fast annual rate of +2.2 %/y, the net export rate would having to be cut by at least at this rate every year just to keep per capita consumption at the same level.  
The consequence of this scenario is that net exports rates decline very steeply and reach zero by 2019. 
Cutting exports sufficiently to keep the per capita consumption rate at 1 b/py would allow AF to continue its present population growth trend for another 10 years, and consequently, added another 220 million people to its already 1 billion population (i.e., 22 million per year for ten years). 
In 2021, when the per capita consumption drops below 1 b/py my population decline scenario starts.
Because AF’s petroleum production rate is predicted to drop steeply, so too does it’s per capita consumption rate and therefore its population.  By 2037, AF’s population has crashed back down to its pre-petroleum era population level of 141 million.
I suppose we could still classify this as a successful mitigation strategy, because it at least postpones the region’s population crash by about a decade.  However, the population crash occurs from an even higher level of 1.2 billion instead of 1 billion.  Moreover, because the net export rate is steeply cut back and ends altogether in 2019, this would have sever economic consequences for the governments in this region which are highly dependent on oil export royalties, as well as the presence of foreign corporations with the expertise to produce the oil.  I wonder how long would those foreign corporations stick around if they could no longer export the oil for profit?  Is there enough domestic expertise to continue the production operations in the absence of foreign corporations?  I’m afraid that the answers to these question do not paint a very positive outlook for the continuing production of oil in AF—but for now, I am making the assumption that this region could maintain production along its predicted trend line even without the economic benefits of net positive oil exports.
The reason why export mitigation is less successful for AF than for FS is apparent from Figure 21 and 22. AF’s present per capita consumption rate is already close to 1 b/py, and, its predicted future production rate suggests a steep drop in the near future.  Consequently, I don’t expect AF to have much excess production capacity to continue net positive exports while keeping per capita consumption at 1 b/py.
Still, staving off a population crash, even for a decade, could be appealing to the governments in power in these regions, and so, I think that this scenario would have a legitimate chance of occurring.  Of course, I think it more likely that what will actually occur is something in between this mitigation scenario (solid lines) and the PIE analysis scenario without mitigation (dashed lines). 
Export Mitigation scenario for the remaining Asia-Pacific region
Once again, Figures 23 and 24 for rAP are completely analogous to figures 19 and 20 above.
Added to Figure 23 is my mitigation scenario for this region: according to my PIE analysis of this region (Part 10 of the previous series and Part 2 of the present series) rAP’s per capita petroleum consumption drops below 1 b/py in 2031, and so at that point, rAP would reduce its exports to keep per capita consumption at 1 b/py for as long as possible.  Unfortunately “as long as possible” for this region is a scant two years.  Why?  Well, from Figure 23, you can see that domestic production rates (blue circles and solid line) are far lower then, roughly 30% of, domestic consumption rates (red circles and dashed red line).  Consequently, rAP is a large net negative exporter, and cutting its relatively small inter-regional exports, that it is expected to have by 2031, only serves to worsen the net negative export balance (solid green line) with only a short  term beneficial effect on sustaining domestic consumption. 
As illustrated in Figure 24 this export mitigation strategy would sustain per capita consumption at 1 b/py for only two additional years.  This would allow this region to continue along the census bureau’s projected positive population growth rate from 2031 to 2032.  The population growth rate at that time is estimated to still be about +0.82 %/y.  With a predicted population in 2030 of about 2.91 billion this translates into adding another 24 million people per year to this region for two more years.  Only then to have the population commence its long spiral downwards to 667 million by the end of my study period in 2065.    
Although I can't discount such a strategy from occurring (e.g., due to local advantages within the region), I don’t see this as being very successful.  The critical level of per capita consumption is only maintain for two years, only to have the population crash from 2.96 billion to 0.67 billion over the next 33 years, a population decline of about 2.3 billion people.   Still, mitgitation is not totally useless in that at the end of my study period in 2065, there is a slightly higher remaining population than in my original PIE analysis scenario (dashed light blue line).  But of course, under either scenario, I expect rAP to eventually end up at its pre-petroleum era 1900 population of 464 million.
Export mitigation is not successful for rAP because unlike AF and FS, is a relatively small interregional exporter and a large net importer of petroleum.  This negative export balance, coupled with the regions huge and still growing population, means that cutting exports adds relatively little to the domestic pool of oil available for consumption. 
It is worth noting that even today, rAP is heavily dependent on the continuance of petroleum imports to keep per capita consumption above 1 b/py.  For instance, if inter-regional exports to rAP were to suddenly end, using 2011 numbers, rAP’s per capita consumption, if totally reliant on domestic production only, would equal about 0.6 b/py.  And rAP's reliance on imports only gets worse with time as domestic production is well past peak (solid blue line in Figure 23) and the population continues to grow. 
Export Mitigation scenario for Japan
At first, talking about export mitigation for JP might seem like an oxymoron, given that this region has very small domestic reserves and production of oil.  Indeed, by far most of JP’s domestic production comes from “refining gains” from the country's domestic petroleum refining sector (see Part 8 of my previous series).  Apparently, crude oil imported into JP is refined domestically, and then, a small portion of the refined petroleum products is re-exported to other regions. 
My export mitigation scenario for this region assumes a continuation of crude oil imports into JP, and that JP stop the re-export of its "refining gains" in an effort to mitigate domestic per capita consumption dropping below 1 b/py. 
Once again, Figures 25 and 26 for JP are completely analogous to figures 19 and 20 above.
Figure 25 illustrates the consequence of export mitigation starting in 2034, the year that JP’s per capita petroleum consumption rate is predicted to reach 1 b/py.  By cutting its exports, JP is able to keep the per capita consumption rate at 1 b/py for 5 years until 2039.  After 2039, with exports at zero, the per capita consumption continues to decline below 1 b/py, and with it the population crashes to a minimum of 71 million in 2058.  Thereafter, the population is predicted to increase again, based on the long term predicted increase in exports from NA to JP. 
Figure 26 illustrates the mitigation in per capita consumption starting in 2034 and a fairly flat per capita consumption rate thereafter.  Note the avoidance of the predicted dip in per capita consumption, with a minimum in 2041, as predicted in my previous PIE analysis.  That dip, centered around 2041, was due to the predicted loss of JP’s oil imports from ME (and to lesser extents from rAP and FS) in the mid to last 2030s, and, before the predicted increase in imports from NA became more substantive, in the late 2040s and 2050s.  It was during that dip that JP’s per capita consumption drops almost to 0.2 b/py and the population was predicted to drop to the pre-petroleum era 1900 population of 44 million (dash light blue line).
According to this export mitigation scenario, cutting exports starting in 2034 helps JP avoid the worst of the dip in per capita consumption, and the corresponding worst part of the population decline.  In particular, keeping per capita consumption at 1 b/py until 2040 avoids all of the steep population decline from 2034 to 2038 predicted by the PIE analysis.
JP’s population still crashes after 2039, at least as compared to the census bureau predicted population (dashed dark blue line).  For instance, instead of the census bureau’s predicted population of 94 million in 2050, this scenario predicts a population is 75 million.  Still, that is a substantial mitigation as compared to crash in population to 44 million predicted by my PIE analysis, without mitigation.   
Export mitigation is more successful for JP than for rAP for a number of reasons.  First, JP’s present per capita consumption at ~13 b/py is much higher than rAP present rate of ~2 b/py.  That means that JP has much more room to fall before hitting the critical level of 1 b/py.  Second, JP’s population is much lower than rAP’s and is in decline, whereas rAP’s population is still growing and predicted to continue growing beyond 2065.  That means that each year, JP needs less and less petroleum to maintain per capita consumption, while rAP needs more and more petroleum.  Third, there is the possibility of JP receiving in the future, small but significant, imports from another source, NA, after it's exports from ME go to zero.  The reason why NA’s small exports to JP are significant is because JP’s population is much lower than rAP’s population.  In other words, exports of 0.07 bby from NA is significant for a population of 0.08 billion (JP predicted population in 2065) people, but not significant for a population of 0.7 billion (rAPs predicted population in 2065).
Any unintended consequences??
In summary, it seems that these mitigation scenarios, as applied to any one of these four regions, would have some beneficial effect of at least delaying the predicted population decline in all four regions, or, reducing the absolute population decline in JP.
Unfortunately, this analysis is still not complete, because we have to consider what impact these scenarios would have if they were applied to all these regions.  In other words, if FS and AF cut their petroleum exports as outline above, what effect would this have on net importers like JP and rAP.  And what about JP and rAP, who both import and export petroleum with each other—who ends up in the better position if rAP cuts its exports to JP and JP cuts its exports to rAP?  Finally, what about the other three large net importers: NA, EU and CN?  What happens to these three regions if FS, AF, rAP and JP were to all cut their exports?
Stay tuned....

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