
Beaufort 1849, an historical novel set in antebellum South Carolina;

Wednesday, October 3, 2012

Per Capita Oil Consumption Is Dropping Like a Rock (in Some Countries)

It is one of my hobbies to follow per capita consumption of oil.  A strange pastime, I realize, and one for which few share my enthusiasm.  But you may be interested in the results!

Since up-to-date per capita oil statistics are difficult to find, I’ve had to derive them myself. I have a nice spreadsheet laden with data from the IEA (International Energy Agency), the EIA (the US Energy Information Agency) and country population stats from Wikipedia, my focus from 2007 until the first half of 2012.  Some of what I’ve come up with makes my jaw drop.

Oil available for export is not rising
In general countries that export oil—Venezuela, Kuwait, Saudi Arabia, UAE, Norway, Libya, Iraq, Iran, Mexico, Russia--have a hard time keeping internal consumption down. Oil sold at subsidized prices placates their populations. Riots tend to occur whenever the cheap oil spigot is shut off.  Consumption in these countries is either increasing, or, if times are very difficult, remains flat. For oil-importing countries (like the US) it matters not so much how much oil is being produced but how much is available on the world market. Rising consumption in oil-producing countries eats away at what is available on that market. Right now there are generally 41.5 million barrels of oil per day available for purchase on the world market. This is down 5% from seven years ago, even though the price of a barrel of oil on the world market has more than doubled.

Countries that have been very poor in the past but are now slowly gaining some ground—India, China, Brazil, Turkey, Vietnam—have had teeny increases in per capita consumption over the last five years. But because these countries are so populous, even teeny increases gobble a sizable share of the world’s available oil. In contrast, the PIIGS (Portugal, Ireland, Italy, Greece and Spain) are in oil consumption free-fall, reflecting their economic troubles. (They will drop further.) Even Austria, Denmark and the UK, countries not in severe economic hardship at the moment, have dropped their consumption significantly. The US has had some tidy drops in oil consumption as well over the last five years. We, too, will drop further.  Read on.

The world average per capita oil consumption is .012 barrels per day per person (BPDPP—a terrible acronym, I know. Just keep in mind this is the statistic we are examining with utter fascination.) Remember this world .012 number. It has not changed for the last five years. All individual country numbers will drive towards this one. If they are higher, they will tend to drop; if lower, they will tend to rise. As peak oil hits and world oil production gradually declines, the world .012 per capita number will slowly drift down, unless world population decides to sink in corresponding proportion.

Lots of red means lots of imports
Now let’s look at our growing-and-determined-to-rise-further countries. They are: India (.003), China (.007), Brazil (.013), Turkey (.010), Vietnam (.004). Together these five countries make up 40% of the world’s population!  All but one presently consume below the world average. All have a strong desire to improve their standard of living by claiming a greater share of this dense, liquid energy source. I predict by 2015 China’s consumption will rise to .009.  India, Brazil and Vietnam will rise by .001 to .004, .014, and .005 respectively. Unlike Vietnam and Brazil, which produce most of the oil they consume, Turkey imports every drop. I doubt this is sustainable and predict Turkey’s consumption will fall to .008 by 2015.

Even this modest rise by these countries will gobble up an additional 4 million barrels of oil a day, 10% of all oil available on the world market. This is oil that has to be subtracted from other countries’ consumption or produced at high marginal cost via tar sands and the like. As the cheap oil found long ago around the world gets pumped out, all that is left is the more costly oil, oil more difficult both to extract and to refine. The result is higher prices that tend to break nations’ economies.  This is the reason that oil exports (first graph on this post) are flattening out rather than rising.

The black line is eating into the green
Now we’ll move on to the big kahuna of oil consumption--Saudi Arabia!  Saudi Arabia has increased its per capita consumption from .079 barrels per person to .104 over the last five years.  This is close to 9 times the world average! Compared to the countries we’ve just looked at, they are inhaling oil. But Saudi Arabia is between a rock and a hard place these days, forced to burn oil to desalinate water, to generate electricity, to air condition a restive population in a hot climate.  Most long time oil observers believe Saudi is now producing flat out with no spare capacity.  As their well production starts to drop off, they’ll rev up planned nuclear and solar installations for electricity, but I predict by 2015 they won’t be able to drop their internal consumption much under .900 per person and their population is still expanding.  This means their consumption will significantly decrease the oil have available for export.

How long before the green's all gone?
Looking at other major oil producers, consumption in Venezuela (.026), UAE (.069), Kuwait (.095), Libya (.049), Russia (.022), Norway (.051) and Iraq (.022) has all been on the rise the last five years. Mexico (.019) and Iran (.023) have kept their use pretty much flat, reflecting their governments’ rather intense need for oil income.  (I’m sure it’s been difficult.)  For political reasons, all these countries will struggle mightily to keep a lid on consumption increases by 2015, much less drop consumption. However, once a country switches from net oil exporter to net oil importer, things can change fast.  (Such a switch is possible for Mexico by 2015, as evidenced by the declining amount of green representing oil export in the chart above. Venezuela has at least five years and the others have at least 7 – 10 years before their exports finish dwindling to zero.)

It was good while it lasted
It’s interesting to consider Egypt (.010), Vietnam (.004) and the UK  (.025), all countries that were oil exporters and became net oil importers during the last five years. The UK dropped from .028 down to .025 over the last five years, a pretty aggressive attempt to stanch their energy deficit bloodletting.  (I predict they’ll drop further to .020 by 2015.) Egypt and Vietnam, in contrast, being very poor and low usage already, had less fat to burn off and so were doing well just to let consumption rise a teeny, weeny .001 amount.  (I predict they won’t rise further between now and 2015.) But when you have to import that teeny, weeny additional .001 times 80 million people--and pay hard currency for it—that teeny weeny hurts.

And so we move on to the PIIGS, the countries giving the Europe Union and the euro so much trouble. This is where we really see some action. First off, with the exception of Italy, most of the PIIGS were oil hogs, at least relative to the countries north of them. (Perhaps this was part of the reason their economic troubles hit first?)  In 2007, Portugal was at .029, quite high given their per capita GDP, Spain was at .035, and Greece and Ireland were at .042!  (In comparison, Germany and France were at .030 and had much more GDP to show for their oil use.)

Disappearing red
Well, now, five years later (using the latest 2012 figures) we see some startling changes. Spain has dropped from .035 to .029.  Given their 25% unemployment rate, I predict by 2015 they’ll be down to .020. Ireland and Greece have plummeted in five years from .042 to .029 and .030 respectively.  I predict by 2015 they’ll be at .020 and .018.  Portugal has dropped from .029 to .023.  I predict in 2015 they’ll be at .018.  And Italy, a country that wasn’t all that oinky to begin with, has dropped from .029 to .023.  I predict by 2015 they’ll be down to .020. Countries that have invested in a decent rail system (Italy, Spain) will have a much easier time with their oil consumption drops ahead.

Fighting hard to keep their green
But other European countries are dropping their oil consumption as well, in advance, it appears, of severe economic motivation. Austria, no slouch in the wealth department, has dropped form .035 to .031. France has lowered from .030 to .027. Denmark (just barely still an oil exporter) has declined from .034 to .029. As we already saw above, the UK is at a very svelte .025 this year. Sweden has dropped from .037 to .032. Finland has dropped from .042 to .036. If a country’s drop in oil consumption is achieved smartly through more efficient transportation methods, leaving economic productivity intact, using less oil per unit of GDP is healthy and will increase the wealth of any country that imports oil. However, if a country’s drop in consumption is due not to increased efficiency but rather due to people being out of work and too poor to use their car anymore, the drop is just another symptom of deep economic pain. I predict Austria will drop further to .027, France and Finland will hit .025, and Denmark and Sweden will decline to .028.

A recipe for disaster
And then there are oil-importing countries with rising consumption that are in for trouble:  Australia, Japan, and Argentina.  Australia’s consumption has increased from .043 to .046 in the past five years.  Maybe all their coal exports to China have made them feel flush, but as China’s economy slows the rubber will meet the road for Australia. I predict they’ll be down to .030 by 2015. (Will this be a breathtakingly steep dive?  Yes, it will.) I don’t know what Argentina thinks it’s doing, letting its consumption rise from .015 to .017. Once they switched from oil exporter to net oil importer, they should’ve put the oil consumption brakes on in a big way. Maybe the impact hasn’t really hit home yet. My prediction is that they’ll struggle mightily to keep consumption flat at .017 until 2015. And poor Japan.  They were nicely reducing their consumption from .039 to .034 when, bam, tsunami hit, nuclear power plants went down, and they had to burn oil to make electricity.  Their oil consumption is back up to .037 and their economy is weak.  My prediction is they’ll be down to .030 by 2015.

We will do better
So, you might wonder, how is the US doing?  Well, we are pretty much an oil oinker in a big way, especially given we import over half the oil we use. The vehicles we drive are half as efficient as European and Asian cars. We subsidize both oil and ethanol to keep our gasoline prices artificially low through massive tax breaks to the oil industry and corn farmers. (We also use more energy to produce ethanol than the ethanol actually gives our cars.) We run enormous trade deficits to buy the oil we import. But the good news is over the last five years, our per capita oil consumption has dropped from .066 to .059! It’s an impressive accomplishment given how sprawled our population is, how heavy our vehicles are, and how little we have in the way of trains, light rail and bike paths. But we still have much farther to fall. (We’re still more than double per capita oil consumption of Germany and France.) I predict by 2015 we’ll be down to .040. That’s way above where Europe was even five years ago, but a challenge  for us nonetheless. Such a rate won’t make us energy independent, but it will reduce our trade imbalance from a hemorrhage to a slow bleed.   

How will we drop our oil consumption by 1/3 in three years you might ask? I see four options. Either 1) people will voluntarily start biking, walking, taking mass transit, driving tiny cars, and moving closer to work and shopping (sound likely?), or 2) gasoline prices will rise, forcing people to start biking, walking, taking mass transit, driving tiny cars, and moving closer to work and shopping, or 3) our economy will crash to the point even $3 per gallon gasoline isn’t affordable, or 4) someone will start a war with gasoline rationing in the US as the result.

If European oil consumption hadn’t dropped so dramatically the last few years, our oil prices would already be higher and our consumption lower. They were far less wasteful with their oil but more leveraged financially (one wonders how that’s possible, given the staggering amount of US financial leverage, but it’s the case), so they were the first to get hit. In addition, up until now, all oil has traded in US dollars the world over, giving us a price advantage. Recently, the Chinese have negotiated not to use dollars with their oil trade partners. A lot of change lies ahead, I think. We’ll see how accurate my predictions turn out to be.

Note:  all graphs except the first are from the Energy Export Databrowser, a great, great website.  Check it out!  The first is from Of Two Minds, another very informative site.