Fossil Fuel Imports Are Already Constrained

Thursday, August 31, 2023 10:04

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For many years, there has been a theory that imports of oil would become a problem before there was an overall shortage of fossil fuels. In fact, when I look at the data, it seems to be clear that oil imports are already constrained.

Figure 5. Oil imports by area based on the 2023 Statistical Review of World Energy by the Energy Institute.

The second is based upon a comparison of reported production and consumption for the same year, using the assumption that if consumption is higher than production, the difference must be attributable to imported oil. The problem with this later approach is that it can easily be distorted by changes in inventory levels. There may also be difficulties with my approach of netting out flows in two different directions, especially if the flows are partly of crude oil and partly of “oil products” of various types.

Figure 6. Oil imports based on production and consumption data of the 2023 Statistical Review of World Energy by the Energy Institute. Amounts adjusted to include “Refinery Gain,” as reported by the US Energy Information Administration.

In both charts, imports for China, India, and Other Asia Pacific are clearly much higher in recent years, while imports for the US, Japan, and Europe are down. The peak year for imports (in total) was about 2016 or 2017. Imports were about 3.5 million barrels a day lower in 2022, compared to peak, with both approaches.

[5] Oil imports by area indicate that nearly all oil exporters around the globe are having difficulty maintaining export levels.

Here, again I show two indications, using the same methods as for oil imports. Since trade is two sided, I would expect total import indications to more or less equal the total of all amounts exported.

Figure 7. Oil exports by area using trade flows based on data of the 2023 Statistical Review of World Energy by the Energy Institute.

On Figure 7, peak oil exports (in total) occur in 2016, with the runner up year being 2017. US oil exports are shown to be nearly zero, even in recent years, because US imports and US oil exports more or less cancel out.

Figure 8. Oil exports based on production and consumption data of the 2023 Statistical Review of World Energy by the Energy Institute. Amounts adjusted to include “Refinery Gain,” as reported by the US Energy Information Administration.

The indications of Figure 8 show that apart from Canada, the amount of oil exported for all the other export groupings shown is lower in recent years than it was a few years ago. This is also evident in Figure 7, but not as clearly.

To some extent, the lower production in recent years is related to the cutbacks announced by OPEC+ (including what I call Russia+). While these cutbacks are “voluntary,” they reflect the fact that based on current oil prices, and based on investments made in recent years, these countries have made the decision to cut back production. No oil exporter would dare mention that it is running short of oil that can be extracted without considerably more investment.

On Figures 7 and 8, “Mexico+South” refers to all the oil being produced from Mexico southward. Besides Mexico, this includes Brazil, Venezuela, Argentina, Columbia, Ecuador, and a number of other small producers. Most of them are experiencing falling production. Brazil is doing a bit better, but it does not seem to be experiencing much growth in exports.

Africa’s peak year for oil exports seems to have been in 2007 (both approaches), with recent exports at a much lower level.

With respect to Russia+, its exports seem to be down from their peak in 2017 or 2018, but not any more than for oil producers from the Middle East. The European Union oil embargo doesn’t seem to have had much of an impact.

The star performer seems to be Canada, with its rising production and exports from the Canadian Oil Sands.

In this analysis, I have “netted out” imports and exports. On this basis, the US hasn’t moved into significant oil exporter status yet. I am sure that there are some people hoping that the oil production of the US will continue to increase, but whether this will happen is unclear. The growth of US oil production in recent years has helped offset (and thus hide from view) the falling exports of many countries around the world.

[6] Coal exports appear to have peaked about 2016. Europe has reduced its imports of coal, leaving more for other importers.

Figure 9. Coal imports by area using trade flows based on data of the 2023 Statistical Review of World Energy by the Energy Institute.

The peak in coal imports seems to have occurred about 2016. In particular, Europe’s imports of coal have fallen significantly since 2006. At the same time, coal imports have risen for many Asian countries, including China, India, South Korea, and Other Asia Pacific. Even Japan seems to have been able to obtain a fairly consistent level of coal imports for the 22-year period shown on Figure 9.

Figure 10. Coal exports by area based on trade flow data from the *2023 Statistical Review of World Energy* by the Energy Institute.

One thing that is striking about coal exports is that they are disproportionately from countries in the Far East. Even the coal exports of the US and Canada are from North America’s West Coast, across the Pacific. Russia’s coal exports tend to be from Siberia.

The coal exports of South Africa have declined significantly since 2018, and other African countries are eager for their imports. Today’s largest source of coal exports is Indonesia. Coal exports from Russia+, at least until 2021, have been been a source of coal export growth.

A major share of the delivered price of coal is transportation cost, which tends to be fueled by oil, particularly diesel. Overland transit is particularly expensive. The real reason for Europe’s decline in coal imports since 2006 (shown in Figure 9) may be that there are practically no affordable coal exports available to it because it is too geographically remote from major exporters. Of course, this is not a story politicians care to tell voters. They prefer to spin the story as Europe’s choice, to prevent climate change.

[7] Natural gas imports and exports have only recently started to become constrained.

Figure 11. Natural gas exports by area based primarily upon production and consumption data from the *2023 Statistical Review of World Energy* by the Energy Institute.

Figure 11 shows that natural gas exports from Russia+ (really Russia, with a little extra production from other countries in the Commonwealth of Independent States) have stayed fairly level, except for a big drop-off in 2009 (probably recession related) and in 2022.

The overall level of natural gas exports has been rising because of contributions from several parts of the world. Africa was an early producer of natural gas exports, but its exports have been dropping off somewhat recently as local gas consumption rises.

More importantly, exports have increased in recent years from the Middle East, Australia, and North America. With this growing supply of exports, it has been possible for importers to increase their imports.

Figure 12. Natural gas imports by area based upon production and consumption data from the 2023 Statistical Review of World Energy by the Energy Institute.

Europe was able to maintain a fairly stable level of natural gas imports between 1990 and 2018, and even to increase them by 2021. China was able to ramp up its natural gas imports. Even Japan was able to ramp up its natural gas imports until about 2014. It has tapered them back since then. India and Other Asia Pacific both have been able to add a small layer of imports, too.

[8] What lies ahead?

The countries that have the greatest advantage in using fossil fuel imports are the countries that don’t heat or cool their homes, and that don’t have large numbers of private citizens with private passenger automobiles. Because of their sparing use of fossil fuel imports, their economies can afford to pay higher prices to import these fossil fuel imports than other countries. Thus, they are likely to be winners in the competition for fossil fuel imports.

Europe stands out to be an early loser of imports. It is already losing oil and coal imports, and it also seems to be an early loser of natural gas imports. However, for all its talk about preventing climate change, the reduction in European imports of fossil fuels hasn’t made much of a dent in global carbon dioxide emissions (Figure 13).

Figure 13. CO2 emissions for Europe and the Rest of the World, based on data of the 2023 Statistical Review of World Energy by the Energy Institute.

I am afraid that no country will really come out ahead. In some sense, the United States is better off than many countries because it is producing slightly more fossil fuels than it consumes. But it still depends on China and other countries for many imported goods, including computers. Given this situation, the United States likely cannot continue business as usual for very long, either.

Source: https://ourfiniteworld.com/2023/08/31/fossil-fuel-imports-are-already-constrained/

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