free html hit counter Peak Oil Debunked: 410. MORE ON THE IMPORT LAND EFFECT

Sunday, July 12, 2009

410. MORE ON THE IMPORT LAND EFFECT

This is a continuation of the previous post 409. THE IMPORT LAND MODEL examining the relevance of the Jeffrey Brown's Export Land Model (ELM).

According to the ELM, growth in oil consumption by exporters will rapidly reduce available exports. However, as I showed in the previous article, total 2008 consumption growth of all major exporters was about 486 kbd, while the 2008 drop in oil consumption by the US alone was -1,262 kbd. This means that increased consumption by exporters was completely swamped by decreased consumption by importers. Indeed, the drop in consumption by the US alone in 2008 eliminated roughly 2.5 years worth of the ELM effect. I call this the import land effect.

This effect is getting larger. Examining the Weekly US Petroleum Products Supplied from the EIA, I compared average US fuel consumption for Jan. 1-July 4, 2008 with the corresponding period for 2009. The results:

2008: 20,504 kbd
2009: 18,831 kbd

As you can see, US consumption is down by about -1,673 kbd in 2009 over 2008. This makes a total drop in consumption of roughly 3,000 kbd in two years -- an amount sufficient to wipe out the ELM for about 6.2 years.

And keep in mind: so far I am only considering consumption shrinkage in the US alone. When we figure in the structural drop in consumption in the OECD, which peaked in 2005 and will show a large consumption drop for the 4th consecutive year in 2009, it's likely that importer demand shrinkage is going to wipe out 8 or more years of consumption growth by exporting countries.

So Jeffrey Brown's 2005 prediction

"As I said last year, I expect that by the end of 2006 we will be in the teeth of a ferocious net oil export crisis." Source

is set to recede even further into the future.

The problem is that Brown's ELM calculates available exports like this

Available exports = Production by exporting nations - Consumption growth by exporting nations

when in fact, it is calculated like this

Available exports = Production by exporting nations - Consumption growth by exporting nations + Consumption shrinkage by importing nations

and the third term is currently swamping the second term.
by JD

63 Comments:

At Sunday, July 12, 2009 at 6:32:00 AM PDT, Anonymous Jeffrey J. Brown said...

Why don't we just calculate net oil exports the way the EIA does: Production less consumption?

Now I do expect some exporters to show consumption declines this year, but this is not unprecedented. For example, following its final production peak in 1996, Indonesia's consumption fell in 1998, which was the primary contributor to an uptick in their net oil exports in 1998 (EIA). This consumption decline in 1998 occurred during a long term increase in consumption, and by the end of 1998, they had shipped 44% of their post-1996 cumulative net oil exports.

In any case, the "POD People" (Peak Oil Debunked People) have repeatedly criticized me for "cherry picking" examples of net export declines. The crux of my argument is that net exports tend to decline at a rate faster than production declines. Once an oil exporting country starts showing lower production, if they don't systematically and continually cut consumption, the most likely scenario is that they will show an accelerating net export decline rate.

For the fourth time, can the POD People show me some examples of an oil exporting countries systematically cutting their consumption in order to maintain constant net oil exports?

 
At Sunday, July 12, 2009 at 8:00:00 AM PDT, Blogger JD said...

Why don't we just calculate net oil exports the way the EIA does: Production less consumption?

Because the pool of available exports increases when importers reduce their consumption.

The crux of my argument is that net exports tend to decline at a rate faster than production declines.

That's a valid point, and I accept it. However, you have consistently reacted with complete denial to my point, i.e. if shrinkage in importer consumption is much larger than growth in exporter consumption, then the effect you mentioned is canceled out, and available exports do not decline at a rate faster than production declines. Please try to wrap your mind around it: reduction in importer consumption increases the pool of available net exports.

For the fourth time, can the POD People show me some examples of an oil exporting countries systematically cutting their consumption in order to maintain constant net oil exports?

I answered your question at great length in the comments to the previous thread. More briefly: There are few if any such countries, but it doesn't matter, because it is the importing countries which are cutting their consumption, and thereby maintaining the volume of available oil exports. That's the gist of the Import Land Effect.

If you're going to respond, please try to understand and respond to the point I'm making.

 
At Sunday, July 12, 2009 at 10:07:00 AM PDT, Anonymous Anonymous said...

It is simple. When your economy is oil (exporters), and you use more, then there is less to sell. Saudi gets this point. The more these countries consume, the less they make on oil revenues. It is economics at it's simplest.

Salt Shaker

 
At Sunday, July 12, 2009 at 12:07:00 PM PDT, Anonymous Jeffrey J Brown said...

As the supply of net oil exports dries up, it's a given that consumption in importing countries will drop. This is so obvious that I didn't think that it was necessary to state it. In a given time period, if the supply of exported oil exceeds the demand, we will see falling prices. If the supply of exported oil falls below demand, we will see rising oil prices in order to balance supply and demand.

I freely concede that the scope of the decline in demand (falling below the supply of exported oil) surprised me, but for what it's worth, the EIA is estimating the total worldwide decline in demand at only about 1.5 mbpd this year. I suspect that we will transition from a combination of voluntary + involuntary reductions in net oil exports this year to mostly involuntary reductions in net oil exports next year and in following years, subject of course to the supply/demand balance.

In any case, a little different way of looking at net export numbers, consumption as a percentage of production (at 100%, production = consumption, and the country generally transitions to net oil importer status).

Consumption as a percentage of production:
(EIA, thousand bpd total liquids, except where shown)

Some Representative Former Net Oil Exporters:

US (Became Net Oil Importer in 1948):
1948: Approx. 100%
2008: 228.6% (19418/8494)

China (Became Net Oil Importer in 1993):
1980: 83.5% (1765/2114)
2008: 201.1% (7984/3970)

Indonesia (Became Net Oil Importer in 2004):
1996: 52.4% (858/1638)
2008: 110.3% (1158/1050)

UK: (Became Net Oil Importer in 2006):
1999: 60.7% (1811/2982)
2008: 107.1% (1697/1585)

Top Five Net Oil Exporters:

SA:
2005: 17.7% (1,963/11,096)
2008: 22.0% (2,374/10782)

Ru:
2005: 29.3% (2,785/9,511)
2008: 29.7% (2,907/9,789)

Nor:

2005: 7.2% (213/2,978)
2008: 8.8% (217/2,465)

Iran:
2005: 36.7% (1,556/4,238)
2008: 42.0% (1,755/4,174)

UAE:
2005: 13.2% (3,74/2,844)
2008: 15.2% (4.63/3,046)

Combined Top Five:
2005: 22.5% (6,891/30,667); Net Exports: 23.8 mbpd
2008: 25.5% (7,716/30,256); Net Exports: 22.5 mbpd

Canada, Mexico & Venezuela:

Canada:
2004: 73.7% 2310/3135
2008: 69.7% 2338/3353

Mexico:
2004: 51.9% (1995/3847)
2008: 66.4% (2123/3192)

Venezuela:
2004: 19.3% (552/2855)
2008: 29.5% (779/2642)

Combined Canada, Mexico & Venezuela:
2004: 49.4% (4857/9837); Net Exports: 5.0mbpd
2008: 57.0% (5240/9187); Net Exports: 4.0 mbpd

 
At Sunday, July 12, 2009 at 12:11:00 PM PDT, Blogger Gavin said...

Jeffrey Brown: Consumers in producing countries and consumers in importing countries both participate in a market place for oil. Oil in the producing countries may be sold at reduced rates to the locals, and is therefore effectively subsidized, but if the consumers in producing countries pay substantially less for their oil then the producers are leaving money on the table. For this reason, they may opt to sell more oil on the export markets when the prices are high, and thereby subject their own citizens to market forces.

I do not believe that the ELM takes this into account, and assumes that this effective subsidization of oil will continue in the face of high prices on the export markets.

Finally, the relationship between supply and demand in the oil markets is complex. Your model pays no attention to the demand side, and I think that this is what JD is trying to get you to understand.

 
At Sunday, July 12, 2009 at 1:42:00 PM PDT, Anonymous Hothgor said...

Net exports are a useful measuring tool when global consumption is on the rise. However, one must demonstrate some restraint in jumping to conclusions when global consumption is declining.

Knowing you as I do, I suspect you will jump on the data point that shows that net exports fell this year from last year. However, I will point out now that this is not indicative of any kind of global trend in light of the fact that there has been a reduction of over 3 million bpd of demand globally - the lions share of which occurred in net oil importers.

Global production is down. Countries that import oil are less inclined to reduce their own production, and as such the lions share of that reduction occurred in countries that are net exporters of oil. That does not mean that voracious consumption growth in these net exporters reduced overall net exports.

JD is 100% right in pointing out that you can not ignore variable c: consumption shrinkage in net importers.

 
At Sunday, July 12, 2009 at 1:53:00 PM PDT, Anonymous DoctorJJ said...

All that really matters is overall demand vs overall production. It doesn't matter if it's domestic demand or foreign demand, domestic production or foreign production. The balance off all those factors is really ALL that matters, and right now, demand globally is being SWAMPED by production and will be for the foreseeable future.

DoctorJJ

 
At Sunday, July 12, 2009 at 2:28:00 PM PDT, Blogger Bloggin' Brewskie said...

Though there's plenty of room for developed nations to drop consumption, the US, particularly, has massive room for improvement. Though this drop is impressive, there's more that can be done: plenty of pickup trucks and Suvs on the highway, too little mass transit (with the exception of a few areas), too many people doling out for suburbia, and too many DC idiots who are too rigid - too recalcitrant - to the idea of mere fuel-efficiency in vehicles (proper standards, at least). The fuel-efficiency standards we'll be donning next decade are standards already upheld or surpassed by other developed nations - even China kicks our ass in this department.

So therefore, because we're so frivolous with our oil consumption, there's so much more we can do.

 
At Sunday, July 12, 2009 at 3:48:00 PM PDT, Anonymous Tony said...

JD, are you saying that provided we stay in a recession, that deepens, there won't be any oil export crisis? Ever?

 
At Sunday, July 12, 2009 at 3:57:00 PM PDT, Anonymous Anonymous said...

"For the fourth time, can the POD People show me some examples of an oil exporting countries systematically cutting their consumption in order to maintain constant net oil exports?"

Do you have no reading comprehension?

Now for tge fourth time will you note that NORWAY is the counter example to your theory.

I could also argue Canada since Canadian consumers pay market rates and thus cut their own consumption when world prices go too high.

Your theory is just like olduvai: too many assumptions needed to make it work and when examined they don't hold up.

DB

 
At Monday, July 13, 2009 at 1:30:00 AM PDT, Blogger JD said...

JD, are you saying that provided we stay in a recession, that deepens, there won't be any oil export crisis? Ever?

No. If I wanted to say that, I would have said that. Please try to focus on what I actually did say.

My point is that the available export situation cannot be understood without taking importer demand shrinkage into account. There's a lot of shrinkage going on out there, a fair amount predating the recession. Japanese consumption peaked in 1996, and has been steadily dropping for 13 years. In fact, if you add the consumption of Saudi Arabia and Japan, the total has been almost perfectly constant since 1995. Japan's demand shrinkage has totally compensated for demand growth of the largest exporter consumer. Similarly, OECD demand peaked in 2005, and this year will mark its 4th consecutive year of declines. These factors can't be ignored. As I've shown, they are much larger than consumption growth in exporting countries. In the last few years, these trends are just a reflection of basic economics: high oil prices cause oil consumption to shrink. The ELM is flawed because it ignores that relationship.

In the longer run, it's perfectly clear that peak oil will be solved on the demand side. Cap-and-trade, gas taxes, rationing, lowered speed limits, even-odd driving, mandatory car pooling, electric and NG transport etc. etc... You know stuff like that is coming. It's a 100% certainty. So what effect will that have on available exports? That's the story the ELM is not telling.

 
At Monday, July 13, 2009 at 6:04:00 AM PDT, Blogger Gavin said...

Jeffrey Brown:

The data you have cited shows 8 countries taking a combined total of 2.3 Mb/d off the market in 8 years

Since in 2007 the OECD have reduced their consumption by 4 Mb/d (source is the usual EIA).

This means that there is an extra 1.7 Mb/d on the world export markets.

There is no reason to believe that the sudden reversal in demand growth is temporary, even if there is a stunning worldwide economic
recovery

Quite the opposite: I think that the climate change / foreign oil message is beginning to hit home in the past two years, despite the economic malaise, and that the changes in consumer behaviour are permanent.

 
At Monday, July 13, 2009 at 7:24:00 AM PDT, Blogger JCK said...

Separating Oil exporter demand from oil importer demand, and treating them as two separate quantities is artificial at best.

I understand that certain countries subsidize their oil prices, but I don't believe that this behavior is limited to net oil exporters only. Doesn't (or didn't) China subsidize oil prices, even as a net importer?

The only thing that matters here is total supply and total demand. The interaction between these two factors sets the price. Subsidized internal use by certain producing countries is probably not all that relevant at a world-wide scale. Looking at "net exports" doesn't seems to provide any additional insight, but appears to provide a way to provide some SCARY numbers, that support certain individuals' positions.

Again, if the model predicted a "ferocious" export crisis in 2006 and this failed to materialize, then I think we really need to question some of the underlying assumptions.

 
At Monday, July 13, 2009 at 8:36:00 AM PDT, Anonymous Anonymous said...

You mean I shouldn't go out and buy a "tiny house"?

TheAntiDoomer

 
At Monday, July 13, 2009 at 8:47:00 AM PDT, Blogger Gavin said...

JCK: You are right; it can be reduced to total world supply versus total world demand.

Subsidization can be cancelled out of any analysis by viewing it is a cost - either as an actual cost if you are an importer or as lost revenue if you are an exporter.

So it could be that long term expensive oil would force changes in consumer behaviour throughout the world, even in oil rich countries, because increased consumption is a cost for all parties.

When you see it this way, you can avoid getting distracted by ELM and other hype, and see the issue clearly: the best case scenario for all of us is if the reduction of oil consumption continues. This turns Peak Oil into a non-event.

 
At Monday, July 13, 2009 at 9:08:00 AM PDT, Anonymous Anonymous said...

JD is right. There is a trend underway.

"Still, the 2008 drop in gasoline consumption in the pacific northwest was not solely a response to soaring prices; it was an acceleration of a slide that had been underway for most of the last decade. Per-capita gasoline consumption diminished in the Northwest in eight of the last nine years. The 2008 fall in per-capita Northwest gas consumption was just the largest of these declines."

Looks like the ELM model is just another model designed to back up scary predictions but with false assumptions.

DB

 
At Monday, July 13, 2009 at 11:20:00 AM PDT, Anonymous DoctorJJ said...

"The only thing that matters here is total supply and total demand. The interaction between these two factors sets the price. Subsidized internal use by certain producing countries is probably not all that relevant at a world-wide scale. Looking at "net exports" doesn't seems to provide any additional insight, but appears to provide a way to provide some SCARY numbers, that support certain individuals' positions.

Again, if the model predicted a "ferocious" export crisis in 2006 and this failed to materialize, then I think we really need to question some of the underlying assumptions."


This.

DoctorJJ

 
At Monday, July 13, 2009 at 1:52:00 PM PDT, Blogger bc said...

Well, I always suspected that the ELM was a very weakly supported model, but now it's been conclusively proved. Jeffrey Brown's Export Land Model is total bunk!

Jeff is a master at "cut and paste" denial and evasion (I think he has about five different things to say, which he repeats in a loop), but while he has Cult Leader status on TOD, I don't expect him to give up any time soon.

In fact, I expect him along any minute, maybe he will tell us about his "Iron Triangle" conspiracy theory.

 
At Monday, July 13, 2009 at 11:58:00 PM PDT, Anonymous Hothgor said...

Without Leanan here to ban posters for questioning his claims and bringing them under a scrutinizing eye, he is very very quiet...

 
At Tuesday, July 14, 2009 at 2:28:00 AM PDT, Anonymous Tony said...

JD: Some inconvenients truths. Recent consumption drops are undoubtedly influenced by the economic recession. Global consumption was on the increase until the high prices of last year and the current recession. Japan's consumption has been falling but Japan's circumstances are hardly the same as the entire developed world. OECD consumption has been falling recently but, again, with high prices last year, and recession, in some cases, since the end of 2007, it's hardly time to declare a trend.

Gavin: OECD consumption is not down 4mbpd since 2007, I think you are using the end of year estimate from the EIA; 2009 is only half over and estimates, especially recent estimates are subject to, sometimes heavy, revision over the next 12 months. Also, to say there is no reason to believe that the recent reversal is temporary is wrong. Of course there is reason to believe that any economic recovery could reverse that recent trend, though the recovery itself might be temporary. You may not believe it will be reversed but to say there is no reason, is beyond reasonable.

I've had my doubts about the ELM, purely because I think the global picture is important. However, I think it entirely possible that, at some stage, some exporters will start to conserve more of their oil, which could exacerbate the net export problem.

 
At Tuesday, July 14, 2009 at 3:01:00 AM PDT, Blogger Sean Daugherty said...

bc,

In Brown's defense, I don't think JD has established that the ELM is "total bunk." It's most likely a real phenomenon. The problem is that the predicted effects of the model have been, and will likely continue to be, countered by effects that the ELM doesn't take into consideration, and that Brown himself has regularly evaded.

 
At Tuesday, July 14, 2009 at 3:44:00 AM PDT, Blogger JD said...

Global consumption was on the increase until the high prices of last year and the current recession.

Right, but that's just the point isn't it? High prices damp demand.

The ELM ignores that principle, and asserts that prices must inexorably rise due to shrinking net exports. Hence Jeffrey's prediction right before oil prices took the biggest dive in history:

"From this point out I think we'll see a geometric progression in prices… you know, $50, $100, $200, $400, whatever. The only question now is how short the periods will be between prices doubling again”. -- Jeffrey Brown, June 5, 2008

In reality, increasing prices cause phenomena like conservation and recession, which reduce consumption in importing countries, and thereby increase available exports. There is a feedback effect, based on economics, which the ELM completely ignores. That effect has bit Jeffrey on the butt once already, as I've shown here, and it's likely to bite him on the butt again.

We can't have a future of soaring oil prices and soaring consumption in importing countries. It's logically inconsistent. Something has to give, and I'm figuring it will be consumption in importing countries, just like we are seeing today. It's comparatively easy to trim fat in OECD countries with lots of waste in their oil usage.

 
At Tuesday, July 14, 2009 at 3:55:00 AM PDT, Blogger JD said...

In Brown's defense, I don't think JD has established that the ELM is "total bunk."

You're right. There is a real effect there and I accept that, as I wrote to Jeffrey above. But the effect is embedded in a more complex, unpredicable mechanism.

 
At Tuesday, July 14, 2009 at 8:21:00 AM PDT, Anonymous Anonymous said...

Tony wrote:
"JD: Some inconvenients truths. Recent consumption drops are undoubtedly influenced by the economic recession. Global consumption was on the increase until the high prices of last year and the current recession. Japan's consumption has been falling but Japan's circumstances are hardly the same as the entire developed world. OECD consumption has been falling recently but, again, with high prices last year, and recession, in some cases, since the end of 2007, it's hardly time to declare a trend."

Nope. There are multiple regions in the OECD with flat or declining oil consumption. The pacific northwest in the US, for example, has had a declining consumption for most of the last decade.

The ELM is basically a flawed model, along with olduvai theory because they both ignore substitution and elasticity of demand.

DB

 
At Tuesday, July 14, 2009 at 8:26:00 AM PDT, Anonymous Jeffrey J. Brown said...

One point to remember is that economic contraction will not only negatively impact demand, it will negatively impact supply--as new production projects are deferred, scaled back or cancelled.

Re: "Anonymous" & Norway. Are you asserting that Norway has maintained constant net oil exports, since their oil production peaked in 2001?

I was asking for examples of exporters that curtailed their consumption in order to maintain their volume of net oil exports, as their production declined. I believe that JD had an answer to this question, up the thread.

One shared characteristic of net oil exporters that have become net oil importers is that it appears that the net export declines tend to be very asymmetric, with the bulk of net exports being shipped prior to the net export decline setting in, e.g., the UK had shipped 81% of total cumulative net oil exports at the end of 1999, when their production and net exports peaked.

In summary I have provided a model, and several real world examples, of long term net export declines showing a faster decline rate than the observed production decline rate (including by the way, Norway), while the POD People insist that I am wrong, while providing no counter examples.

 
At Tuesday, July 14, 2009 at 10:09:00 AM PDT, Anonymous Jeffrey J Brown said...

BTW, anyone notice a pattern in the following numbers?

Some Net Oil Exporters Showing Production Declines
Production & Net Export Declines Per Year, Over the Referenced Time Frame, Are Respectively Shown (EIA, Total Liquids)

Saudi Arabia (2005-2008)
-1.0%/year (Prod.) & -2.7%/year (Net Oil Exports)

Norway (2001-2008)
-4.7%/year & -5.1%/year

Iran (2005-2008)
-0.5%/year & -3.4%/year

Nigeria (2005-2008)
-6.4%/year & -6.9%/year

Venezuela (1997-2008)
-2.6%/year & -4.5%/year

Mexico (2004-2008)
-4.7%/year & -13.5%/year

Colombia (1999-2008)
-3.6%/year & -8.3%/year

Oman (2000-2008)
-3.1%/year & -4.4%/year

Vietnam (2004-2008)
-3.5%/year & -46.0%/year


Some Former Net Oil Exporters
Production & Net Export Increases/Declines Per Year, Over the Referenced Time Frame, Are Respectively Shown (EIA, Total Liquids)

China (1985-1992)
+1.8%/year & -16.9%/year

Indonesia (1996-2003)
-3.9%/year & -28.9%/year

UK (1999-2005)
-7.8%/year & -55.7%/year

 
At Tuesday, July 14, 2009 at 10:27:00 AM PDT, Anonymous Anonymous said...

In other news, Exxon Mobil is spending millions on algae oil technology. If anyone is doubting peak oil is upon us now, they really need to ask themselves why an oil giant such as Exxon would be searching for an alternative to their bread & butter.

-ZZ-

 
At Tuesday, July 14, 2009 at 10:42:00 AM PDT, Anonymous Jeffrey J Brown said...

Russia has shown a resumed production decline for only one year, but here are the respective 2007 to 2008 production & net export numbers:

-0.9%/year & -2.5%/year

 
At Tuesday, July 14, 2009 at 11:55:00 AM PDT, Anonymous Observer said...

Did I here JD correctly?

Cap-and-trade, gas taxes, rationing, lowered speed limits, even-odd driving, mandatory car pooling, electric and NG transport etc. etc... You know stuff like that is coming. It's a 100% certainty.

In 5 years time maybe JD will be singing:

Food riots, depression, stock markets crashes, 30% unemployement, are a coming. It’s a 100% certainty.

5 years ago (not quoting JD of course but PODs in general)

Peak oil is BS, oil is produced in the earth and is unlimited… Peak-Schmeek!

Glad to see you are halfway to the doomer camp JD. I realize that no one has a crystal ball, however, do you care to take as guess as to what will cause your certainties of “gas taxes, rationing, lowered speed limits, even-odd driving, mandatory car pooling…”? Mayby higher oil prices due to some form or another of oil scarcity (policial/geological/who cares)…. Care to then take a guess on how your 100% certainty list will affect future company’s budgets, and your lifestyle? My guess is much the same way as GM & Chrysler were affected; however, sooner or later, the government will stop having the purchasing power to nationalize everything!

Half way there…
PODs mind-shift in the last five years are actually stunning when you compare what they conceded back then and what they concede now!

 
At Tuesday, July 14, 2009 at 12:00:00 PM PDT, Anonymous observer said...

Also JD,

It's comparatively easy to trim fat in OECD countries with lots of waste in their oil usage.

This is supported with what?

It took a global recession to reign in world consumption, now you flippantly toss this statement out like we can all cut x% of consumption with little to no side effects?

At the risk of sounding snide… are you serious?

 
At Tuesday, July 14, 2009 at 12:01:00 PM PDT, Anonymous Anonymous said...

Please allow those previous two posts to be posted. I'm simply trying to hold you to the same standard you hold many that oppose your view.

Sincerely,
Observer

 
At Tuesday, July 14, 2009 at 12:38:00 PM PDT, Anonymous Jeffrey J Brown said...

The ELM (Export Land Model) would fall in the "Former Net Oil Exporter" category, with the following numbers, over an 8 year period:
-5.0%/year and -28.8%/year

Graph showing year over year change in net oil exports for ELM, the UK and Indonesia:
http://www.energybulletin.net/image/uploads/38948/image005.png

 
At Tuesday, July 14, 2009 at 4:36:00 PM PDT, Blogger JD said...

5 years ago (not quoting JD of course but PODs in general)

Peak oil is BS, oil is produced in the earth and is unlimited… Peak-Schmeek!


As you point out, I've never said anything remotely like that. I don't believe that, and never said anything of the sort. This blog started, on Day One, with the assumption that peak oil will occur. In fact, no one involved in the peak oil debate denies that peak oil will occur (including CERA, Yergin, Mike Lynch, Peter Odell). You're just throwing the usual straw.

Half way there…
PODs mind-shift in the last five years are actually stunning when you compare what they conceded back then and what they concede now!


Yah, aside from the problem that you completely fabricated "what they conceded back then". I've been promoting hard demand reduction measures like rationing for *years*, like this little nugget and this little nugget from 4 years ago.

On the points you mention, I haven't changed my position one iota.

 
At Tuesday, July 14, 2009 at 4:55:00 PM PDT, Blogger JD said...

It took a global recession to reign in world consumption, now you flippantly toss this statement out like we can all cut x% of consumption with little to no side effects?

At the risk of sounding snide… are you serious?


Absolutely. And I've gone into almost nauseating detail on that topic. First, the Hirsch Report notes that 1/3 of all oil consumption in the US goes to discretionary auto and air travel. That's a good rough indicator of the waste level. Or simply observe rush hour traffic on any day, in any city in the US. We're talking millions of people driving alone in monstrous traffic jams, in 6,000 pound gas-guzzlers. Clearly, the waste is enormous, and there's no genuine need for things to be that way. Bicycling, mopeds, electric scooters, car-pooling, EVs, NG vehicles, telecommuting... the possibilities for oil-saving are numerous, and involve pretty minor tweaks in behavior.

Or consider the OECD city where I live: Osaka-Kobe-Kyoto. This city (and country) is already densely carpeted with an EV system (electric subways and trains). There is no need for anyone at all to drive in this city, aside from trucks and other service vehicles. Literally everyone in this huge metropolis could function quite easily without a car.

Saving oil is easy. It's like smoking cigarettes; people are addicted to oil, so they just *think* they need it. You can double your fuel-efficiency in one day simply by riding with somebody else, or raise your efficiency to infinity by bicycling.

 
At Tuesday, July 14, 2009 at 5:00:00 PM PDT, Blogger JD said...

Russia has shown a resumed production decline...

Jeffrey, your inability to focus on the topic of conversation is pretty shocking. You might as well be a bot, or a random generator.

BTW, have you folks seen the Random Youtube Insult Generator? It's pretty funny. I think we need a Random Jeffrey Brown Generator.

 
At Tuesday, July 14, 2009 at 7:58:00 PM PDT, Anonymous Jeffrey J. Brown said...

JD,

I proposed the ELM as a simple model to basically help me explain net export math. The model showed that net exports declined faster than production declines, with an overall accelerating rate of decline in net oil exports.

I have shown 13 examples of net exporters of various sizes, over a time period about 23 years, showing net export decline rates that are faster than production decline rates. Here's another example--Yemen, with a production decline rate of about -5.4%/year, with a net export decline rate of about -11.5%/year, from 2001 to 2008. So, that's 14 examples. I was accused by multiple people of "cherry picking" examples of net export declines. So where are the counter examples?

In any case, we have seen a short term drop in demand below the net export volume, and we have seen a combination of voluntary + involuntary reductions in net oil exports this year that I think will transition next year to mostly involuntary net export declines. I think that the overall pattern going forward will mostly be importers bidding for declining net oil exports, with the losing bidders being forced to reduce their consumption. I suspect that there will be similar short term periods of demand falling below net exports, but then net exports fall again. Rinse & repeat.

 
At Wednesday, July 15, 2009 at 2:31:00 AM PDT, Blogger Gavin said...

Jeffrey; do you really think that producing countries will continue to increase their consumption absolutely regardless of what is happening in the rest of the world?

If oil is expensive, then producers will want to increase their exports in order to increase their profits. That means the rate of increasing consumption could slow in these countries.

And expensive oil will force consuming nations back into reccession, which in turn reduces their consumption levels.

Recession in the consuming is bad news for the producing nations; bad news for their oil sales, petrodollar investments and for all their non-oil trade with the consuming nations. Clearly they are market participants, even if their oil is effectively subsidized.

Look at Iran, in the economic doldrums despite the worlds cheapest gasoline.

At the same time, the climate change / foreign oil debate is starting to hit home and Americans still have very raw memories of oil at more than $4/gallon. Permanent behaviour change could mean that demand has peaked, and as JD points out we are on the tip of the iceberg in terms of how far this could go.

Yes the ELM is serious, and well done for creating the model and giving us an acronym to refer to it by. But its ability to predict the price of oil is very limited. As you have no doubt learned!

Sorry buddy, but example after example won't convince me otherwise.

 
At Wednesday, July 15, 2009 at 4:51:00 AM PDT, Anonymous Jeffrey J. Brown said...

Gavin,

Regarding oil prices, what I said was that I could not predict oil prices at a given point in time, because I had no way of quantifying demand. I said that oil prices were best described as a series of doublings, but that I had no way of predicting the time period between the doublings, with the additional caveat that the price of oil was a horse race between a long term decline in demand and a long term (and IMO accelerating) decline in net oil exports.

One of the problems with debating this topic is that the critics are countering what is basically a quantitative model with qualitative arguments. For example, at Mexico's 2008 rate of decline in production, they would have to cut consumption by about 50% by the end of 2013 in order to maintain their 2008 level of net oil exports. I fully expect some exporters to show lower consumption, but I suspect that will simply result in a slow down in the total rate of increase in consumption in exporting countries.

 
At Wednesday, July 15, 2009 at 8:00:00 AM PDT, Blogger JD said...

One of the problems with debating this topic is that the critics are countering what is basically a quantitative model with qualitative arguments.

My arguments are very quantitative. I showed with numbers derived directly from your ELM model how you misleadingly portray a sub-linear decline (i.e. decline by even less than a constant amount each year) as an "accelerating decline". I also showed, quantitatively, how shrinking consumption in the US alone has wiped out as much as 6 years of the ELM effect by compensating for consumption growth in exporting countries. I also showed how chronic consumption shrinkage in Japan has totally compensated for consumption growth in Saudi Arabia, the fastest growing consumer amongst exporters etc. The key points I'm making are all based on the numbers.

It's true that Mexico is facing tough problems now and in the near future. But that is almost entirely due to rapid depletion, not the ELM effect. As I pointed out, Mexican consumption growth in 2008 was a pathetic 13,000 b/d, compared to a production drop of 314,000 b/d. ELM is making a very small contribution to Mexico's problems.

 
At Wednesday, July 15, 2009 at 8:12:00 AM PDT, Anonymous Anonymous said...

"Re: "Anonymous" & Norway. Are you asserting that Norway has maintained constant net oil exports, since their oil production peaked in 2001?"

Stop trying to frame the question.
I recognise a crappy intent at rhetoric when I see it.

I'm claiming that the ELM model is flawed because it assumes that net exporters will not LIMIT consumption. How much that production is limited will depend on the regime in power.

Norway is quite clearly an example of a regime that has limited consumption pre and post peak when you compare it to it's closest competitor the UK. To deny that is sophistry of the worst sort.

"I was asking for...."
I don't give a damn what you were asking for. You don't get to set the debate here. If you come on here and start spouting your propaganda, YOU defend yourself AND pay attention when presented with arguments that refute your crap. This is not TOD and nobody is going to cut you any extra slack here.

DB

 
At Wednesday, July 15, 2009 at 8:28:00 AM PDT, Anonymous Observer said...

JD,

I made an effort not to put words in your mouth and also did not ‘completely fabricate’ anything as you imply, a bit more study on either side of the debate and you may have unearthed the following as it related to the PO debate 5 years ago.

Yah, aside from the problem that you completely fabricated "what they conceded back then".

Check out the following links… all from 2004.. Abiotic Oil anyone? 56,800 Google hits on this topic

http://www.questionsquestions.net/docs04/peakoil1.html
http://www.fromthewilderness.com/free/ww3/100404_abiotic_oil.shtml

I did not claim you where inconsistent, I simply pointed out that the POD arguments have changed from PO is a load of crap, to PO will happen (way in the future), to now where it is something like ‘even if PO does happen it is fairly easily mitigated by x’.

What I see missing in your consistent argument is the economic side effects of conservation. We’ve just seen what conservative home purchasing has lead to… lower home prices, bankruptcies, banking crisis, then government bailouts. Slower vehicle purchasing has also lead to bankruptcies, massive layoffs and downsizing, then government bailouts.

I agree with one of the previous bloggers, you appear to be arguing in favour of a perpetual recession to avoid PO, but neglect to recognize what causes that recession.

This is what I meant by “are you serious?: it seems to me you are inadvertently arguing the PO’s points for them (right up to the conclusions that is, you stop just short of that). From what I see, the only difference between yourself and Simmons, and other POs is that they dare to take a ‘guess’ at what will happen when forced conservation is in full swing. That’s a good stance for you; you can never be accused of being ‘wrong tomorrow’.

Large scale conservation results in massive reorganizational pains (pains is putting it mildly).
Conservation forced to quickly (part of many POs arguments) may cause civil unrest; this has already happened in many 3rd world nations and has already occurred in the states in the 70’s.

Other than attempting not to take a stab at or guess at the possible negative side effects I’m not sure how your arguments differ from well known PO supporters. Although you do get to play the moral high ground card, and feel better about yourself, because you did not publish any invalid future scenarios.

 
At Wednesday, July 15, 2009 at 8:51:00 AM PDT, Blogger JCK said...

"I had no way of quantifying demand."

OK. So you choose to ignore demand, simply because it's much harder to quantify than supply? If you're going to try to model oil into the future without accounting for demand, then you're almost guaranteed to get the answer wrong; hence the (much of it valid) criticism you're now receiving.

Again, why not focus on total world demand, rather than worry about whether a given consumer of oil is living in net exporting or net importing countries? Unless there's something fundamentally different about a guy in Angola filling up his car than someone in, say western Europe, then I see no reason to think that "net exports" have any special significance.

I understand that some exporting countries subsidize local prices, but then you need to take a more detailed look at the subsidizes in each country, and try to figure out the extent to which these subsidies increase demand.

As an aside, if demand is as inelastic as the doomers like to think, then I can't imagine those subsidies have much of an effect at all!

 
At Wednesday, July 15, 2009 at 3:59:00 PM PDT, Blogger Sean Daugherty said...

Observer,

So, wait a minute... JD is responsible for every crackpot with a baldly unscientific theory regarding energy? Sure, plenty of idiots were talking up abiotic oil a few years ago. Unless JD was one of them, or was in any way responsible for perpetrating that abuse of science, he's no more responsible for it than, say, Jeffrey Brown is for Jim Kunstler, Ken Deffeyes, or any other high-profile peakist. For as long as I've been reading here, JD has maintained the same argument, which is helpfully stated right at the top of the site.

Or, put more simply, "debunkers" like JD do not all believe in the same things, just like not all peakists are of the same opinions.

Beyond that, I think the jury is still very much out as to what caused the current recession: high oil prices certainly weren't helpful, but there were plenty of other issues with little to no connection to oil that were of equal importance. To say that "conservation" caused the current economic clusterfark is premature and irresponsible.

Beyond which, it assumes the same problems so many predictions of PO-related doom do by assuming that conservation is a strictly zero-sum prospect. As has been suggested numerous times by JD and others here, while the share of the economy that relies strongly on oil will undoubtedly decrease over time, there are other sectors of the economic world that stand to grow precisely because of oil's decline. Alternative, non-ICE modes of transportation are the most obvious example, but there's also urban design, construction, and so forth. It's difficult and typically dangerous to make predictions about the trajectory of the economy, but there's no reason that conservation of oil needs to spark recession.

Both JD (and myself and, I suspect, other contributors to his blog) acknowledge that there will need to be adjustments in a post-peak world. But I think the very clear difference between someone like JD and someone like Simmons is that the latter either doesn't believe that non-traumatic adaptation is possible or likely, whereas the former sees it as a far more likely outcome than the societal apocalypse model.

And I think there is something to be said for not making predictions when you aren't reasonably certain they will come to pass. If you have valid information to share, do so and let your audience make their own predictions. Getting wrapped up in the predictions game is unnecessary and unproductive, even if you do happen to have enough skill and/or luck to be right more often than you're wrong.

 
At Wednesday, July 15, 2009 at 5:30:00 PM PDT, Blogger JD said...

JCK unearths yet another dopey prediction by Jeffrey Brown:

"IMO, if Russian crude oil production is now declining, I expect it to show an annual decline rate in the vicinity of 10% per year. If they do show a 10% decline rate in production, and if their domestic consumption continues to increase (in the short term at least) at about 5% per year, their net exports would probably fall by 50% in less than two years." -- Jeffrey Brown, July 19, 2007. Source

Russian oil production (EIA):
July 2007: 9896 kbd
Apr. 2009: 9875 kbd

Note also that Russian oil production is in decline by Jeffrey Brown's usual definition of decline:

Russia avg. annual production (EIA)
2007: 9,874 kbd
2008: 9,789 kbd

Latest on Russian oil exports (report dated July 15, 2009):

"MOSCOW -(Dow Jones)- Russia's oil exports are expected to increase 1% on the year to 245.5 million metric tons in 2009, the Economic Development Ministry said Wednesday in its forecast for 2010-2012, Prime-Tass news agency reports."
Link

Enjoying that egg facial, Jeff?

 
At Thursday, July 16, 2009 at 6:13:00 AM PDT, Anonymous DoctorJJ said...

Yes! In the face!!!!

http://www.youtube.com/watch?v=8ZukKptslqw

DoctorJJ

 
At Thursday, July 16, 2009 at 9:39:00 AM PDT, Anonymous Jeffrey J Brown said...

JD,

Regarding the 2007 Russian comment, you are correct. I made a math error. The EIA shows production of 9.7 mbpd and consumption of 2.8 mbpd for Russia in 2006, leaving net exports of 6.9 mbpd. With a production decline rate of -10%/year and a consumption rate of increase of +5.%/year, their net exports in 2008 would have been 4.8 mbpd, which would be an overall 30% decline in net oil exports, not 50%.

However, in January, 2006, I also said that I expected Russia to resume its production decline within one to two years, and we did see a slight production decline in 2008, with a net export decline of -2.5%/year, which was of course less than I expected. But Russia has just resumed its production decline, and the logistic model indicates that their mature basins are in an advanced stage of depletion. We shall see what happens over the next two to three years.

If anyone would like to review Sam Foucher's more detailed projections for the top five net oil exporters (including Russia), you can do a Google Search for Top Five Net Oil Exporters. We first collaborated on studying top net oil exporters in January, 2006, when we didn't event have complete data for 2005, but the EIA shows combined net exports from the top five of 23.8 mbpd for 2005 and 22.5 mbpd for 2008. The 2006-2008 data points are falling between Sam's middle case and his high case, which suggests that the top five will collectively approach zero net oil exports around 2033 or so.

Any case, as I have repeatedly stated, high flow rates and high net export rates can be quite misleading since net export declines are front end loaded, with the bulk of cumulative net oil exports being shipped early in the decline phase, e.g, Indonesia and the UK in just two years after their respective final production peaks has already respectively shipped 44% and 48% of post-peak cumulative net oil exports.

Re: Anonymous & Norway, I guess I am a little puzzled about what we are arguing about. The crux of my argument is that net exports tend to decline at a faster rate than the production decline, when an exporting country starts showing lower production, and even JD does not dispute this. All of the production declines that I have reviewed so far in exporting countries show this pattern, including Norway. In fact, of 11 exporters that I have looked at that are currently showing net export declines, Norway is the median case, with a 2001-2008 net export decline rate of -5.1%/year.

Re: JCK, my point is that the model and 15 or so actual case histories that I have reviewed show that net exports decline at a rate faster than production declines, and furthermore the overall pattern shows an accelerating net export decline rate. Except for brief periods, I suspect that the long term pattern that we will see is that demand will have to generally adjust to falling supply rather than vice-versa.

 
At Thursday, July 16, 2009 at 9:50:00 AM PDT, Anonymous Jeffrey J Brown said...

Here is Sam's outlook for Russian production & consumption, which I presented at the ASPO-USA conference in the fall of 2007:

http://www.theoildrum.com/files/image013.png

I believe that we used an estimated value for 2007 production. The projected 10 year production decline rate was -5.1%/year plus or minus 2%. Sam showed his low case, middle case and high case projections. The 2008 production value, down slightly from 2007, fell between his middle case and high case.

Note that the best case scenario is that Russia approaches zero net oil exports around 2029. However, as I stated at the ASPO-USA conference, this model is based on mature Russian basins. The frontier basins are a bit of a wild card, but I suspect that they are to Russia as Alaska is to the US, i.e., helpful, but no panacea.

 
At Thursday, July 16, 2009 at 11:10:00 AM PDT, Anonymous Jeffrey J Brown said...

BTW, regarding decline rates for Russia, my guesstimate in the summer of 2007 was that when Russia resumed its production decline, it would require a double digit annual decline rate to get back to the logistic trend line. However, at this time Sam was just beginning to start work on his detailed modeling of the top five net oil exporters.

When Sam completed his work on Russia, he concluded that the most rapid decline rate we would see over an initial 10 year period was -7.1%/year, (-5.1%/year plus or minus 2%), and this is what we showed in the top five paper. And the small decline in Russian production in 2008 fell between Sam's middle case and high case for Russia.

So, I guess my question is why do the POD people highlight a blog post, with an obvious math error, but ignore the far more detailed quantitative work in our top five paper?

And not to belabor the point, but the top five have shown a combined decline in net exports that falls between Sam's middle case and high case.

 
At Thursday, July 16, 2009 at 3:48:00 PM PDT, Anonymous Anonymous said...

"Re: Anonymous & Norway, I guess I am a little puzzled about what we are arguing about."

I know. This is because you don't pay attention to the other side of the argument. You're like a scratched DVD.

The POINT (for everyone else, since Jeff doesn't hear anything except his own voice) is that it is quite clearly possible for an exporter to LIMIT their own consumption, thus negating the argument that net exports must decline at an increasing rate due to increased consumption by the exporting country.

In fact, if there were no viable substitutes (like the oodles of natural gas and electric vehicles) I would expect that exporters would brutally suppress their own populations in order to export and make as much money as possible.

DB

 
At Thursday, July 16, 2009 at 3:50:00 PM PDT, Anonymous Anonymous said...

"And not to belabor the point, but the top five have shown a combined decline in net exports that falls between Sam's middle case and high case."

This is another example of only hearing your own voice.

Perhaps the lack of demand meant that production was throttled back?

Too difficult a concept for ya?

DB

 
At Thursday, July 16, 2009 at 6:49:00 PM PDT, Anonymous Hothgor said...

""And not to belabor the point, but the top five have shown a combined decline in net exports that falls between Sam's middle case and high case."

This is another example of only hearing your own voice.

Perhaps the lack of demand meant that production was throttled back?

Too difficult a concept for ya?"

Took the words right out of my mouth.

The thing that you must understand, folks, is that Westexas and company do not see production throttling as a viable reaction to oil demand collapse. Instead, they see it solely as forced production cuts due to oil depletion in those countries. The notion that a country might do the *gasp* responsible thing to reduced global demand is, well, inconceivable.

 
At Thursday, July 16, 2009 at 7:29:00 PM PDT, Anonymous Jeffrey J. Brown said...

Re: Anonymous & Norway, it's always interesting when I am told what my own model means. If "Export Land" showed no increase in consumption, they would go to zero net oil exports in 14 years, instead of 9 years, not exactly a big difference. The rate of change in consumption, with a given production decline rate, just changes the glideslope of the net export decline.

As noted above, Norway--like the other declining net oil exporters--has shown a net export decline rate that exceeds its production decline rate.

Or let me put it this way, if Norway were the sole source of exported oil for the world, world net oil exports would have dropped by about 30% since 2001. I remain mystified as to how this does anything to ease anyone's concerns about net oil exports worldwide.

 
At Friday, July 17, 2009 at 2:06:00 AM PDT, Blogger Gavin said...

Jeffrey, oh Jeffrey, what do you want us to say?

ELM is real. POD readers tend to be highly clued up about Peak Oil and we are all very aware of the combined effects of decline and increasing consumption of the export markets.

But there seems to be a trend, observable in a range of OECD countries before the recession hit, of demand peaking. Have a look at JD's post "The other peak oil".

In the US, the demand peak coincided with the 2008 oil price spike and the financial crisis. This means that we dont know if it is permanent.

But there is evidence to suggest that it is. This a time when the US has a president very committed to clean energy and energy efficiency, and when serious efforts are getting underway to commercialize a range of alternative energy sources. Very notable is the recent press on Algae Biodiesel.

Now Jeffrey; if you insist on having the last word on this matter, then go for it. It is as obvious as night and day that you are ignoring the peak demand issue, whilst trying to defend your honour in a forum of your critics, many of whom dont dispute the ELM in any case.

 
At Friday, July 17, 2009 at 11:09:00 AM PDT, Anonymous DoctorJJ said...

What Jeffrey will not admit is that his entire theory is worthless. Yes, that's right. It's completely futility.

The only reason it has held somewhat to form is BECAUSE of what JD has described as the Import Land model. If it were not for decreasing imports by net importers, then the price of oil would go up exponentially as less and less was brought to market. That obviously did not happen, even though Jeffery predicted it would.

The other side effect of exponentially increasing prices would be that these net exporters' growth in oil demand would also decrease and therefore totally destroy this theory.

As others have pointed out, if worldwide demand continued to grow, the price goes up and either the producer's demand goes down or they have to subsidize the price of the product to their own citizens.

Elasticity in demand both of net importers and exporters based on price as well as potential subsidies (and therefore lost revenues to those countries) is not accounted for in this ridiculous model. Ergo, it's WORTHLESS!!!!!

DoctorJJ

 
At Friday, July 17, 2009 at 4:17:00 PM PDT, Blogger Lenny said...

Wow - y'all like to split hairs.

Fundamentally, if populations continue to grow while reserves continue to fall, then now matter what level of demand destruction occurs, ultimately export land consumption eliminates exports.

Even if export land populations remain constant, dwindling reserves will cause available exports to contract at an accelerating rate.

Lenny

 
At Friday, July 17, 2009 at 6:42:00 PM PDT, Blogger JD said...

Tony, I'm on an unfamiliar computer, and I meant to delete some spam but deleted your remark by accident. Can you post again? Can you please post your remark in the China thread too? I'm genuinely sorry, and it won't happen again. JD

 
At Saturday, July 18, 2009 at 6:12:00 AM PDT, Anonymous Jeffrey J. Brown said...

Gavin,

I would like to respond, but my last missive was not posted.

 
At Sunday, July 19, 2009 at 2:51:00 AM PDT, Anonymous Tony said...

I can't remember exactly what I wrote originally, JD.

You seemed to be saying that high prices dampened demand and ELM doesn't take this into account. Well, it's hard for any model to do that accurately, so I doubt you'd be able to do better than the ELM to figure out the effect of increasing consumption in exporting countries. It now seems clear that some part of the spike in oil prices last year was due to speculation so it's hard to figure out what economic recovery will do to prices and to demand.

I commented that global consumption was on the increase until the price spike and until the recession started to bite. If the economies of recession countries recovers, is it not reasonable to suppose that the overall growth in consumption will increase? Also, you are hoping that many developed countries will continue what you see as a trend of falling consumption. However, this trend in developed countries didn't stop consumption increasing overall. Add to that subsidised fuel prices in some major exporting countries (and others) and it doesn't seem reasonable that consumption will not resume its rise, if the recession ends. So I don't think there is would be any sense of vindication if you turn out to be right just because the recession continues, or worsens.

In the other thread, from which you deleted my post, someone else has already commented that China subsidised fuel costs, which is a possible reason for its continued growth. So I don't think I need to restore my comment there.

 
At Sunday, July 19, 2009 at 6:27:00 AM PDT, Anonymous Jeffrey J. Brown said...

To summarize, I proposed a simple mathematical model; I compared the model to some real life case histories; I made some qualitative assessments of future net oil exports by the top three net oil exporters and my co-author, Samuel Foucher, generated some detailed quantitative projections for net oil exports from the top five net oil exporters.

The past three years of annual (EIA) net export data for the top five fell between Sam's middle case and high case. This same modeling suggests that the top five will have shipped about one-third of their post-2005 cumulative net oil exports by the end of next year.

I've now looked at about 15 real life case histories of former net oil exporters and countries with declining net oil exports. In all 15 cases, their net export decline rates exceed their production decline rates.

I have been repeatedly told by the POD people that the model (which suggests that the net export decline rate will exceed the production decline rate, even if consumption is not increasing) is wrong, and that I am "cherry picking" examples of declining net oil exporters. But the real life case histories support the model. I don't know what else to say, so I shall bid you adieu.

 
At Monday, July 20, 2009 at 12:48:00 PM PDT, Blogger JCK said...

Agree with DoctorJJ

ELM is completely bunk.

It only works if you assume that consumption in exporting countries is completely unaffected by price. Absent that assumption, it makes NO SENSE to segregate demand in importing countries from demand in exporting countries.


It's simply numerical chicanery.

 
At Monday, July 20, 2009 at 12:59:00 PM PDT, Blogger JCK said...

Jeffrey,

Please explain why consumers in exporting countries are price insensitive. In other words, your model assumes that exports from any given country will fall to zero before they reduce consumption.

Does price have no effect at all on consumption in oil producing countries?

 
At Thursday, July 23, 2009 at 9:57:00 PM PDT, Anonymous Tony said...

Many of the major exporters have price subsidies, so their consumers don't feel global price increases as much as those of other countries.

But, for sure, prices can, and do, affect consumption. The underlying cause of price increases, however, is the lack of ability for production to match consumption. So, in the case where price impacts consumption, the global economy isn't exactly in a great state and it doesn't matter if the ELM isn't completely accurate.

However, where consumers are insulated, to some degree, from global prices, prices won't affect consumption as much as in other places. If these are in oil exporting countries, the effect is likely to be a further decline in exports at a time that declining production is forcing prices up for everyone else.

 
At Tuesday, August 18, 2009 at 4:54:00 PM PDT, Blogger Marian said...

It seems that we are already at pre-2000 gas consumption levels. That's amazing - it only took 2 years.

 

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