Oil-Rich Nations Use More Energy, Cutting Exports
- From: Jim Higgins <gordian238@xxxxxxxxxxx>
- Date: Sun, 09 Dec 2007 12:58:46 -0500
Oil-Rich Nations Use More Energy, Cutting Exports
http://www.nytimes.com/2007/12/09/business/worldbusiness/09oil.html?_r=1&hp&oref=slogin
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.”
--
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