Friday, November 30, 2012

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 Qo, Qand 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. 

Saturday, November 17, 2012

Predicting Global and Regional Petroleum Consumption Trends Part 8: Japan

Most of my introductory remarks about Japan (JP) to follow are based on two EIA reports: a country analysis report on Japan, and, a report on the East China Sea. 

It might seem odd to include JP, a relatively small country, in a nine-region global analysis of global petroleum consumption trends.   However JP’s petroleum consumption as a country is third only to the USA and China.  As you will see, not too long ago JP’s annual consumption rate was over 2 bby and it was still about 1.6 bby in 2011.  That makes JP’s consumption rate greater than the entire African continent’s consumption rate (about 1.2 bby), about the same as the entire former Soviet Union region (1.5 bby) and little bit less than South America (2.2 bby) in 2011.  Oil is Japan’s single largest source of primary energy at 44% of total energy consumption, although this has been falling over the past decades in favor of natural gas and nuclear power, at least until the earthquake and tsunami in March 2011. 

What Japan does not have, is substantial domestic petroleum reserves.   Citing the Oil and Gas Journal, the EIA states that JP’s reserves of oil are only 0.044 bbs (i.e., 44 million barrels).  There is much talk and intrigue about JP having access to “domestic” reserves in the East China Sea, south of Okinawa, in an island chain called Daioyu/Senkaku (Chinese/Japanese name).  As the dual naming implies, there is an ownership dispute for these islands between China and Japan. 

The EIA estimates that the East China Sea has between 0.06 and 0.10 bbs of oil in proven and probable reserves, but, China’s estimates of “undiscovered resources” runs much higher, at 70 to 160 bbs.  Of course, even 0.1 bbs of oil is worth a lot of money, but, as far as having much impact on meeting JP’s present oil consumption (presently about 1.6 bby), this is negligible— about 1 month’s supply.   However, a reserve of 70 to 160 bbs is a very different matter—maybe enough to go to war over, some suggest.  Personally, I think that there would have to be "proven and probable reserves" of at least 16 bbs (e.g., about ten year’s worth of JP’s present consumption) to make it worthwhile for JP and others (e.g., China) to fight over any time soon.

In view of JP’s lack of domestic oil, it should be no surprise that JP’s present consumption rate is almost totally reliant upon the continued importation of oil from one or more of the other eight regions featured in this series. 

Let’s take a look at what regions Japan imports its oil from, and, what the import trends from those regions to JP look like. 

Japan’s production, consumption and net export trends: an ELM analysis
My usual source of data, the BP Statistical Review, reports JP’s petroleum consumption rate, but, does not report information about JP’s domestic production rate—I suppose because the number is too small to meet the Review’s reporting criterion.  Therefore, the data for JP’s production was from the EIA’s International Energy Statistics Division, corresponding to the EIA’s  “total oil supply,” which reports back to 1980.

Figure 34 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) logistic equation best-fit curves (solid lines with the same respective colors).  To calculate net exports before 1980 I am assuming that JP's production was equal to zero.  The solid green line before 1980 is based on a back-extrapolation of the logistic equation best-fit to the 1980-2011 EIA data set (see Figure 34a).

At the vertical scale used in Figure 34, you can barely see JP’s miniscule production rate, so I reproduced the production data and the NLLS best fit in Figure 34a, below:
Production rates in JP were modeled using a single logistic equation fits to the EIA total oil supply data for 1980-2011.   Consumption rates in the JP were modeled using two logistic equation 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 8 below:

Table 8 summary of best fit parameter for production and consumption data for JP


Qo (bbs)
Q (bbs)
a (yr-1)
Production 1980-2011
0.16
2.3
0.084
Consumption 1965-1982
3.7
41
0.19
Consumption 1983-2011
25
106
0.077

As illustrated in Figure 34a, JP production rate has increased substantially since 1980, although there are signs that the growth in the production rate has stalled-out and in for a decline, as implied by the NLLS fit. 
 
It might seem curious that the production rate in the last several years, about 0.05 bby, actually exceeds the EIA’s estimate of total reserves, of about 0.044 bbs.  The discrepancy is explained by the fact that, by far, the bulk of JP’s production is from “refining gains,” from the country's domestic petroleum refining sector.  For instance, according to the EIA Japan country analysis report, in 2011 of its total 130,000 b/d production rate, JP only produced 5000 b/d of crude oil.  In other words, less than 4% of JP’s production corresponds to actual crude oil being produced domestically. 

Similar to that discussed for Europe in Part 7 of this series (and discussed in Part 10 of my early Trade Movements series) it seems that JP has found a way to profit by importing crude oil, refining the oil domestically, and then re-exporting some of the refined products to other regions.  For instance, according to the EIA (citing the Oil & Gas Journal), JP has a refining capacity of 1.7 bby (4.7 mbd) which is second only to China’s refining capacity in the Asia-Pacific region.  This capacity is actually slightly higher than JP total consumption rate, although JP also imports some refined products in addition to importing crude oil.  Therefore, it would seem that JP has the ability to profit by serving a “middle-man” role exporting to China and the remain Asia-Pacific regain, similar to the way Europe exports to North America and Africa.

Figure 34 shows that JP’s consumption rate has clearly been in decline since the late 1990s.  It looks like the consumption rate peaked in 1996, at about 2.1 bby, and after about 5 years of a shallow decline, the consumption rate started to decline more steeply through the 2000s from 1.97 in 2001 to about 1.61 bby in 2011.  This corresponds to an 18% decline in the last 10 years, or, a 24% decline in the last 15 years from the peak in 1996.  In other words, JP has been experiencing annual declines in its petroleum consumption rate in the range of 1.6-1.8 %/yr for last decade-and-a-half.

If you squint hard at the red circles in Figure 34, you will see a slight up-tick in consumption in 2011 compared to 2010.  This is probably reflecting the effects of the tsunami and subsequent Fukushima Daiichi nuclear plant shutdown in March 2011, and then a country-wide shut down of nuclear power plants.  The slight up-tick in petroleum consumption reflects increased electricity generation from petroleum-fueled generators.   It was only in July 2012 that the first nuclear plants began to reopen, so the trend of increasing petroleum consumption, or at least a less steep decline in petroleum consumption, might continue into 2012 and beyond. 

The order-of-magnitude greater consumption rate (red line) compared to production (blue line) is also readily apparent in Figure 34, illustrating how JP is a huge net importer of petroleum (green line).  Given JP’s low domestic production rate, it is not surprising to see that JP’s year of peak imports was in 1996, the same year as JP’s peak consumption rate.   Still, in 2011, at +1.52 bby in net imports, 94% percent of Japan’s petroleum consumption comes from imports.

Predicting Petroleum Export Rates from JP to other Regions
Figure 35 shows the relationship between petroleum production rates and export rates for JP, as already worked out in my previous study from a few months ago.   This is the same as Figure 4 in Part 2 of “Relationship between Petroleum Exports and Production.”

The proportion of JP’s total exports, expressed as a percentage of production (black Xs, rhs scale), is increasing (r2=0.78).  This linear regression line is likely reflecting the combination of flatting production rates, i.e., flatting refining gains, and increasing refined product exports.  That these percentages are greater than 100% of domestic production is perhaps not so surprising now that we see how JP has been functioning as a middle-man for the regions that export crude oil (i.e., the Middle East) and the remaining Asia-Pacific countries (rAP, blood red line) and China (CH, pink line) who are import JP’s refined products. 

For instance, as illustrated in Figure 35, in 2011, 77% and 15% of JP’s exports went to rAP and CH, respectively, with the remainder going to NA and EU.   In 2011, according to the BP Statistical Review, JP’s total exports to other regions amounted to 0.11 bby (290,000 bpd) of products and 0.00022 bby (1,000 bpd) of crude oil—I wonder where that 1000 barrels of crude got exported to, and, why export it, given JP’s large refining capacity.   In contrast, JP’s total imports were 1.3 bby of crude oil (3,560,0000 bpd) and 0.34 bby (930,000 bpd) of petroleum products. 

Figure 36 shows the predicted absolute regional exports from JP to the other regions, based upon the combination of the production rate trends shown in Figure 34a and the export trend lines shown in Figure 35.

According to this prediction scenario, JP’s exports will top out at about 0.18 bby in 2023, and most of those exports will go to rAP and CH in a ratio of about 3.4:1.  The reason for the downturn after 2023 is due to the predicted decline in domestic production in Figure 34a (again for JP, mostly reflecting declining refining gains as imports decline).  Declining production overcomes the upward export trend shown in Figure 35.  Of course, the absolute amounts of these exports are very small compared to the exports to and from any of the other eight regions considered in this series, although they may be still be important to some countries in the rAP region that gets most of JP’s exports: Australia, New Zealand, Singapore and China.

Predicting Petroleum Import Rates to JP from other Regions
Figure 37 shows the sum (black line), and individual import contributions, predicted for each of the other eight regions, to JP.

In part Part 7 of this series, I showed a pretty grim picture for Europe’s future imports.  But, the import picture for Japan looks even grimmer than Europe’s, mainly because JP is so heavily dependent on the ME for its imports. 

As shown in Part 2 of this series, not only is ME’s production toping out and likely about to decline, but the proportion of ME’s production being exported is strongly trending downwards. Moreover, the situation is even worse for JP, because ME’s downward trend of exports to JP is even steeper than its overall downwards export trend.  This is due to ME’s increasing proportion of exports going to rAP and CH, to the detriment of NA, EU and JP. 

However, of the three regions NA, EU and JP, it is JP by far that is most dependent on receiving imports from the ME.  For instance, from the prediction curves Figure 37, in 2011 about 79% of JP’s petroleum imports corresponding to about 1.2 bby, came from ME and about 10% came from rAP.  Projecting out 10 years to 2022, ME is predicted to still provides 76% of JP imports, but the absolute amount will be only about 0.6 bby, a 50% decrease from 2011.  It is JP's high dependence on ME's oil, as I said in an earlier post would cause JP to be especially devastated by a sudden disruption in oil flow from the ME (see: If the Strait of Hormuz Closed, Which Importing Region Would Suffer the Greatest Loss?). 

The only slightly bright-spot for JP’s future import picture is that imports from FS and NA are predicted to increase (Figure 37, purple and dark green lines, respectively). 

Unfortunately, the rate of increasing imports from FS and NA barely offsets the rate of declining imports from rAP, let alone from the ME.  And, because FS’s production rate is predicted to being peaking about now, absolute imports from this source are likely to go down after about 2017.  Projecting out even farther to 2030, if these trend continue, JP's total imports will have declined to about 21% of its imports in 2011.

Predicting Consumption Rates for JP based on the PIE analysis
Since JP has substantially no domestic petroleum production and minor petroleum exports, it is no surprise to see that my PIE analysis predicts a petroleum consumption rate curve that essentially mirrors the predicted total import curve in Figure 37 (black line).

I applied my normalization to JP in the same manner as done for NA, SA, AF and EU.  For JP, the average calculated consumption rate, based on the summation of production plus imports minus exports for the 2001-2011 time range, was 0.038 ± 0.036 bby lower than the reported consumption rate for JP as reported in the BP review.  Therefore my normalization for JP 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 38 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 38 suggest that, if JP’s production rate follows the decline trend predicted by the logistic equation best fit (solid blue line), and JP’s export and import rates continue along the trend lines shown in Figures 36 and 37, respectively, then the predicted total net export rate curve (solid light green line) is going to continue declining, until about 2041, after which, net export become more negative as imports from NA increase. 

JP’s predicted consumption rate (blood red line) almost exactly mirrors the net export curve, which almost reaches zero in 2041, before going up again slight due to imports from NA.  The predicted rate of decline in consumption is even steeper than the already steep decline predicted by the logistic curve fit to the consumption rate data (dash line in Figure 38 and solid red in Figure 34).  That is an annual decline rate that’s even steeper than the decline rate of -1.6-1.8 %/yr over the last 10 to 15 years.  For instance, the predicted consumption rate is 1.42 bby in 2012 and 0.68 bby in 2022—a 52 % decrease over 10 years or about -5.2 %/y.   That’s much steeper than the consumption rate declines of -2.2 %/y predicted for NA and -3.2 %/yr for EU, earlier in this series. 

Final thoughts
There is a slow-motion disaster occurring in Japan that eventually will be more devastating than the Fukushima Daiichi disaster, and subsequent complete shutdown of all nuclear power plants, was in 2011. 

According to the EIA country analysis report in 2010, nuclear power provided 13% of Japan’s total energy consumption and petroleum provided 44%.  If petroleum consumption in Japan declines at the predicted rate of -5.2 %/yr, this would mean a total annual decline in total energy consumption of -2.3 %/yr.  Even if Japan’s petroleum consumption rate declines at only -1.8 %/y, as has been happening over the past decade, that corresponds to a total energy decline of -0.8 %/yr.

Total energy decline rates of -2.3 %/y to -0.8 %/y would mean that it would take about 6 to 16 years to have a total energy consumption decline that is the petroleum energy equivalent of shutting down all of Japan’s nuclear power plants in 2011.   At least some of Japan’s nuclear power plants will reopen in the coming years, and, this will help mitigate the energy decline due to the ongoing decline in petroleum consumption, for a few years, at least.

However, if the declining export trend to JP continues, then, in less than 30 years (about 2041), Japan would have essentially no petroleum to consume. 

I think that the effects of having no petroleum to consume go well beyond the loss in 44% of total energy consumption provided by oil, because of oil’s vital role in transportation.  That is, to what extent could the infrastructure to support that other 56% of energy sources could be sustained in the face of little to no oil? 

Given these trends, I find it very hard to imagine how Japan’s economy (e.g., as measured by GDP or GDP per capita) would have any chance of remaining at present levels in the face of -5 %/yr declines in petroleum consumption.  Rather, for the next 10-15 years Japan is likely going to suffer even steeper economic declines than it has in the past 10-15 years. 

If the East China Sea really did have oil reserves equal to +10 years of Japan’s present consumption rate, and, Japan could acquire that oil through diplomacy or war against China, then perhaps the predicted downward trends in petroleum consumption and the economy could be delayed

Absent such an event, however, within the next 30 years as oil exports from the Middle East end, Japan will be living with substantially less oil than today.
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Next time, I will cover one of the last two regions in my 9-region analysis: China or the remaining Asia-Pacific countries.