“Just the facts, ma’am” — Joe Friday in the 1950s cop show, Dragnet
Facts trump theory every time. Especially when that theory is ideologically motivated.
An economist working for a big oil company doesn’t want the company’s shares to lose value, so he/she will haul out the supply and demand chart and state that when the demand for oil gets to a certain level, then entrepreneurs will just go out and find more of it.
Unfortunately (or fortunately, depending on your point of view), geology and oil production technology will only allow that world view to go so far. The reality is that we always get the easiest stuff out of the ground first. The dregs are always more expensive and of lower quality.
With that in mind, let’s take a look at the top 10 oil-exporting countries and see how they have been doing in recent years.
No. 10 on the list is Algeria. Their production peaked in 2007 and it has been going down slightly since then.
No. 9 is Mexico. Its production has been falling like a stone. It started going down in 2004 and is now down 17 per cent from that period. And its oil exports are falling like a lead lined brick. They are expected to dwindle to nothing in about five years time.
Nigeria, at No. 8, has a different set of problems. Its own citizens are constantly blowing up pipelines and kidnapping oil workers. So its production is down 16 per cent from its maximum output in 2005 (production could be increased, but that would necessitate some real democracy and power sharing, which the top Nigerian kleptocrats tend to dislike).
At No. 7 on the list is Kuwait. Its production is down 17 per cent, but at least this is from a peak far back in 1972.
Finally, at No. 6, we find the only oil exporter in the whole top ten list that definitely hasn’t peaked yet. The output from the United Arab Emirates has been rising at a respectable pace. If you subtract the amount that it consumes domestically, it provides about 3.5 per cent of the crude oil for the global market.
At No. 5 is Venezuela. Its production is down a whopping 32 per cent since 1970. Only a small part of this is due to the fact that Hugo Chavez has a tendency to seize the assets of international oil companies (and thus their expertise goes elsewhere). The main reason for the huge slump is simply that its oil fields are in serious depletion mode.
No. 4 is Iran, where output is down 29 per cent since 1974. Maybe if it wasn’t a thuggish theocracy, it could do better. And if wishes were horses, beggars would ride.
At No. 3 is Norway. The North Sea cornucopia of the 1980s and 90s is now on a serious downward slide. They’ve had a 28 per cent drop since 2001.
The Russian Bear is at No. 2. Even with western investment and technology, it has been struggling to hold steady in recent years. Its peak of production (14 per cent higher than present) was actually back in the bad old days of communism.
And at No. 1 (no surprise) is Saudi Arabia. Its production is down marginally since their peak in 2005. Ostensibly, this is due to voluntary reductions. They figure if they hold down production, then that will tend to keep the global price of oil at a reasonably high level. But they won’t let anyone look at their books, so some analysts are saying that the reductions are not entirely voluntary.
Perhaps the mighty Ghawar oil field is finally showing its age.
There you have it. Of the top ten oil exporters, only one or two is actually able to increase production. What then do you think will happen when the next hundred million Indians and Chinese buy their first cars? Think hard. Because at this point, facts morph into extrapolation.
Joe Friday may not like it, but without a crystal ball, extrapolation is our next best tool.
Evan Bedford is a local environmentalist. Direct comments, questions and suggestions to email@example.com.