Tompkins County Relocalization Project

[Tompkins County Relocalization Project <tcrp-news AT lists.ibiblio.org>]

This is the export problem that's been worrying a lot of oil
supply analysts over the last few months.  Bottom line: we will
probably see a supply peak well before an actual production peak.

Jon

==================================================================

The New York Times
December 9, 2007
Oil-Rich Nations Use More Energy, Cutting Exports
By CLIFFORD KRAUSS

The economies of many big oil-exporting countries are growing so
fast that their need for energy within their borders is crimping
how much they can sell abroad, adding new strains to the global
oil market.

Experts say the sharp growth, if it continues, means several of
the world’s most important suppliers may need to start importing
oil within a decade to power all the new cars, houses and
businesses they are buying and creating with their oil wealth.

Indonesia has already made this flip. By some projections, the
same thing could happen within five years to Mexico, the No. 2
source of foreign oil for the United States, and soon after that
to Iran, the world’s fourth-largest exporter. In some cases, the
governments of these countries subsidize gasoline heavily for
their citizens, selling it for as little as 7 cents a gallon, a
practice that industry experts say fosters wasteful habits.

"It is a very serious threat that a lot of major exporters that we
count on today for international oil supply are no longer going to
be net exporters any more in 5 to 10 years," said Amy Myers Jaffe,
an oil analyst at Rice University.

Rising internal demand may offset 40 percent of the increase in
Saudi oil production between now and 2010, while more than half
the projected decline in Iranian exports will be caused by
internal consumption, said a recent report by CIBC World Markets.

The report said "soaring internal rates of oil consumption" in
Russia, in Mexico and in member states of the Organization of the
Petroleum Exporting Countries would reduce crude exports as much
as 2.5 million barrels a day by the end of the decade.

That is about 3 percent of global oil demand. It may not sound
high, but experts say demand for oil is so inflexible, and the
world has so little spare production capacity, that even small
shortfalls can raise prices. In 2002, when a labor strike in
Venezuela took 3 percent of global production off line, oil prices
spiked 26 percent within weeks.

The trend, though increasingly important, does not necessarily
mean there will be oil shortages. More likely, experts say, it
will mean big market shifts, with the number of exporting
countries shrinking and unconventional sources like Canadian tar
sands becoming more important, especially for the United
States. And there is likely to be more pressure to open areas now
closed to oil production.

Greater political stability and increased drilling in some
important oil states, notably Iraq, Iran and Venezuela, could help
offset the rising demand from other oil exporters.

"Ten years from now, world capacity to produce oil could be 20
percent higher than today," said Daniel Yergin, chairman of
Cambridge Energy Research Associates. "But a lot will depend on
how the geopolitics work out."

Growth in demand among oil exporters is one aspect of a larger
issue, breakneck economic growth in parts of the developing
world. China and India are expected to account for much of the
increase in global oil demand in the next 20 years. But Fatih
Birol, chief economist at the International Energy Agency in
Paris, rated consumption growth among oil exporters as the
second-biggest threat to meeting the world’s oil needs.

"It’s a big problem, and growing all the time," Mr. Birol said.

Internal oil consumption by the five biggest oil exporters --
Saudi Arabia, Russia, Norway, Iran and the United Arab Emirates --
grew 5.9 percent in 2006 over 2005, according to government
data. Exports declined more than 3 percent. By contrast, oil
demand is essentially flat in the United States.

CIBC’s demand projections suggest that for many oil countries,
including Saudi Arabia, Kuwait and Libya, internal oil demand will
double in a decade.

Factors contributing to the trend include increased
industrialization, higher government spending and increasing
personal consumption. According to a World Bank report, economic
growth in the Middle East and North Africa has doubled since the
1990s, and Russia has done even better.

Oil money is giving many countries the means to invest in their
own economic development, and robust global growth is creating
markets for their goods -- including plastics, chemicals and fuels
refined from oil.

To be sure, many oil-exporting states have a long way to go before
they achieve Western living standards. The global oil market is
still dominated by traditional consumers, particularly the United
States, which uses nearly a quarter of the world’s oil.

Perhaps surprisingly, though, some producing countries have
surpassed the United States in oil consumption per person. They
include Bahrain, Kuwait, Qatar and the United Arab Emirates.

Particularly in oil-producing countries with large populations,
like Indonesia, Russia and Mexico, a rapid rise in car ownership
is a big factor driving consumption increases. Russian farmers are
replacing horses and carts with gas-guzzling four-wheel-drive
vehicles, while urban consumers are snapping up BMWs even before
they learn to drive.

"Most of the producing countries have young populations entering
the driving age and can more readily afford to buy cars because
the price of fuel is low," said Charles McPherson, an oil expert
at the International Monetary Fund. "It’s certainly pulling
product off the international markets."

Some oil-exporting countries use price controls and subsidies to
ensure cheap fuel for their people. These programs are politically
popular, even though experts say they contribute to wasteful
energy use.

Kuwaitis, for instance, often leave their air conditioning --
powered by electricity generated from natural gas or oil-derived
fuels -- running for weeks while on vacation, said an official at
the World Bank. Sportsmen of the United Arab Emirates ski indoors
on manufactured snow and play golf on lush courses that require
desalinated water produced with fuels refined from oil.

Saudis, Iranians and Iraqis pay 30 to 50 cents a gallon for
gasoline. Venezuelans pay 7 cents, and demand is projected to rise
as much as 10 percent this year. Auto sales have tripled in four
years. "Where cheap oil is viewed as a national human right,
you’ve virtually got runaway demand," said Chris B. Newton, an
executive of the Indonesian Petroleum Association in Jakarta.

Indonesia flipped from exporting oil to importing it three years
ago because of sagging production in depleted fields and rising
demand. Iran, Algeria and Malaysia are vulnerable in the next
decade. Most oil experts view Mexico as the next country likely to
flip, in as little as five years.

Rapidly falling production in Mexico’s aging Cantarell oil field
is part of the problem. Also significant, though, is the rising
number of cars on Mexican roads. They have nearly doubled, to
almost 16 million, in the last decade, and gasoline consumption is
growing 5 percent a year.

In Mexico City the other day, a bricklayer named Jaime Guerrero
arrived at a local Chevrolet dealership. His extended family cried
"bravo!" as he signed the papers for his first car.

"To have a new car in my name is a dream transformed into
reality," said Mr. Guerrero, 26. He and his family piled in and
weaved through the chaotic traffic of the capital, hunting for a
priest to douse the car with holy water.

"I don’t worry about the climate or shortages of oil in the
world," Mr. Guerrero said. "I just worry if gasoline prices go
up."

===

Reporting was contributed by Wayne Arnold from Singapore; Nazila
Fathi from Tehran; Jens Erik Gould from Caracas, Venezuela; Andrew
E. Kramer from Moscow; Elisabeth Malkin from Mexico City; and Jad
Mouawad from Riyadh, Saudi Arabia.