At this point, you're probably saying it can't get any worse than this. It does.
We have been talking about Peak Oil in terms of oil production, but to oil consumers who do not live in oil exporting countries, what is important is not oil production, but net oil exports.
Each country that produces oil also is an oil consumer. The USA, for example, is one of the largest oil producers in the world, but since our oil consumption is so much larger than our oil production, we have to import oil. Mexico, on the other hand, produces more than it consumes so it is a net oil exporter. Consequently, for Americans, what is important is not how much Mexico produces, but how much it can export after its own domestic consumption. It is the Net Oil Exports of oil exporting countries that determine the global price of oil, not oil production itself.
The problem for oil importers such as the USA is that the domestic consumption of oil by net oil exporters like Mexico is growing year over year. Consequently, net oil exports are affected not only by declines in production but by increases in domestic consumption by the population of net oil exporters. This magnifies the decline in the amount of oil available on the world market. If Mexico's production declines by 500,000 bbls and its domestic consumption increases by 500,000 bbls in a year, then Mexico will suffer an oil export decline of 1 million bbls.
Most net oil exporters are experiencing increasing domestic consumption of oil every year, so the oil available on the world market is declining faster than oil production itself. So far some countries have been able to compensate for the fall in oil exports of other countries but how much longer this is possible is unknown. Mexico, for example, could cease to be a net oil exporter as early as 2012 although it still would be an oil producer.
For a comprehensive review of this market dynamic, see energybulletin.net |
