As the era of oil abundance starts to wane, geopolitical relations between consuming countries and producing countries will grow increasingly important. Consumer countries are going to be forced to pursue substitutes and alternative ways of living. Paramount for them is the speed and manner with which their imports will decline.

If the decline proceeds too rapidly, it will wreck the economy instead of providing needed incentives for the transition away from oil. Self-sufficient producer countries, on the other hand, can choose to either continue their oil dependence as long as their own supplies last, or to start substituting and developing alternate ways of living. The latter would be more sensible from a long term economical perspective. The major question in this issue is what exporting countries will do with the oil they do not need themselves? Will they keep more oil for their own future or will they continue, and when possible increase, exports to gain economic benefits in the present?

At what speed will exports decline?

Geological and political factors will determine the decline rates.

  1. Geological in the sense of the amount and type of oil-exporting countries on which a consumer country is dependent. Are they mainly countries past peak or will they, for a while, still be on the production upslope? Are their exporting countries fields mainly onshore (slow declines), shallow water (fast declines) or deepwater producers (fastest declines)? Are there new oil countries or regions to import from remaining such as the Caspian Sea and the Arctic?
  2. Political in the sense of economic situations, stability and political motives. Are they politically stable or unstable countries with volatile exports? Are they forced to continue exports because of their economical situation or more prone to reduce exports because of concerns about future energy supply? Are the exporting countries likely to switch exports to other countries for political or economical reasons?

In answering these questions an estimate can be obtained for the speed of decline and the relative risk importing countries faces in a future world with a scarce supply of oil. For starters, data on the net imports for a consumer country can be identified. Net imports are here defined as:

Nt = (lc – Ec) + (lp – Ep),


Nt = net imports,
lc = Crude oil imports,
Ec = Crude oil exports,
lp = Oil product imports,
Ep = Oil product exports.

By doing this exports are subtracted from imports to avoid double counting. For example, country A imports 100,000 barrels per day (b/d) from country B and country B exports 50,000 b/d back to country A. Gross Imports statistics for country A would show 100,000 b/d of imports while net imports are only 50,000 b/d.

The United States – a quick NET import overview

The US imported a net average of 12.19 million b/d in the first six months of 2007. While the U.S. imports from many countries, 60% of all imports are coming from only 5 countries and 85% comes from 10 countries. The top ten are Canada, Venezuela, Saudi Arabia, Mexico, Nigeria, Algeria, Angola, Iraq, Russia and the United Kingdom. Since 2005, imports from the top 10 have remained at a plateau of 10.33 million b/d while total imports have declined by 360,000 b/d. This trend is similar to the plateau in total liquids, residing since 2005 near 85 million b/d.

I do not see the plateau import situation changing considerably in the period until 2010. Imports will probably rise slightly thanks to production increases from Angola, Nigeria, Canada and Brazil. Together these increases should be sufficient to offset declining imports from Mexico and the United Kingdom, both of which have peaked. But other countries outside the top 10 have peaked and Venezuela is shifting exports from the US towards China. The other countries in the top 10 will not play a key role in the period up to 2010. Russia is trending towards a production plateau of 10 million b/d. Nigerian and Iraqi production are bound to rise but the extent is uncertain due to continued instability. The wildcard here is Saudi Arabia; if production continues to decline, it could lead to declining imports for the United States. However, the decline in Saudi Arabian oil production would have to be quite sharp, which is even more unlikely.

The picture changes rapidly between 2010-2015. In that period it will become incrementally more difficult to keep imports flowing. Firstly, because Algeria and Russia will reach a state of declining production. Secondly, because production in the deepwater countries–Angola, Nigeria and Brazil–will no longer increase at a rapid pace and could even start to decline depending on oilfield project timetables and present exploration results. The decrease in production can be offset, but only by large increases from Iraq. It is the only country where, with sufficient effort, oil production could rise rapidly in a timeframe of five years (assuming peace breaks out soon). Furthermore, it is quite likely that Saudi Arabian production in that period will start to decline because the supergiant Ghawar will certainly have peaked by then.

One can see the rough impacts of these developments on imports in figure 1 below. Three scenarios have been plotted. The first is the “Base Case” in which imports from Canada, Nigeria, Angola, Iraq and Brazil increase while imports from Venezuela, Mexico, Russia, United Kingdom and the sum of other import areas decrease. This scenario is shown in more detail in figure 2 below. The second is “Iraqi Peace” in which opposite to the base case, imports from Iraq quadruple from 500,000 b/d now to 2 million b/d in 2015. The third is “Political Turmoil” in which imports from Venezuela and Mexico decline even steeper, imports from Canada and Brazil rise more slowly and imports from Saudi Arabia decline sharply.

The import story tells us that there still is a window for the United States to act, be it a short one of perhaps five years. Extending the length of that window is only possible by a drastic increase in Iraqi imports. The likelihood of that happening is much smaller than the downside risk coming from shifts in exports from the United States towards Asia due to political and economic factors. This competition is already occurring in Venezuela and Angola where the US is losing ground.

Rembrandt Koppelaar is president of ASPO Netherlands, contributor to The Oildrum Europe. and a student in the field of Environmental Economics at Wageningen University.

(Note: Commentaries do not necessarily represent ASPO-USA’s positions; they are personal statements and observations by informed commentators.)