Maine Owl

Saudis and other exporters using more of their own oil


Year-on-year change in world oil exports, which clearly have peaked ("World Oil Exports: A Comprehensive Projection", The Oil Drum, October 10, 2006)

With oil breaching $100 the last couple of days, it is a good time to analyze a key trend that soon will affect major oil importing countries like the USA in a big, big way. This trend is the falling net quantity of world oil available for export. Just as an example from this key October 2006 post at The Oil Drum, Mexico will no longer export oil after 2015. Mexico! That country currently supplies a significant chunk of US imports.

More recently, a page-one story appeared in the Wall Street Journal for December 12, 2007 that explained what the Saudis have...

"in the works are new seaports, an extended railroad system, a series of new industrial cities and a score of refineries, power stations and smelters." All of that building means that more oil will stay inside the Arab nation. For every 100 barrels of oil produced by Saudi Arabia, 22 are used there. That is up from 16 barrels just seven years ago.

Another story in the International Herald Tribune elaborates:

Oil-rich nations use more energy, cutting exports
By Clifford Krauss - Published: December 8, 2007

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.

There is no issue I can imagine that impacts American security more than this situation. America at once consumes oil with an intensity three times that of any other country, yet it is highly dependent on resources that must be brought in from outside. Meanwhile, those countries that supply the oil desire to keep more of it for themselves for their own development.

Individual states are in an even more dangerous situation. Maine, for example, has zero oil resources yet has a high per capita rate of consumption.