WSJ - Oil Exporters Are Unable To Keep Up With Demand

[hatrack]

The world’s top oil producers are proving unable to put more barrels on thirsty world markets despite sky-high prices, a shift that defies traditional market logic and looks set to continue. Fresh data from the U.S. Department of Energy show the amount of petroleum products shipped by the world’s top oil exporters fell 2.5% last year, despite a 57% increase in prices, a trend that appears to be holding true this year as well.

There are several reasons behind the net-export decline. Soaring profits from high-price crude have fueled a boom in oil demand in Saudi Arabia and across the Middle East, leaving less oil for export. At the same time, aging fields and sluggish investments have caused exports to drop significantly in Mexico, Norway and, most recently, Russia. The Organization of Petroleum Exporting Countries also cut production early last year and didn’t move to boost supplies again until last fall.

In all, according to the Energy Department figures, net exports by the world’s top 15 suppliers, which account for 45% of all production, fell by nearly a million barrels to 38.7 million barrels a day last year. The drop would have been steeper if not for heightened output in less-developed countries such as Angola and Libya, whose economies have yet to become big energy consumers.

For all the attention paid to China’s increasing energy thirst, rising energy demand in the Middle East may pose the greater challenge. Last year, the region’s six largest petroleum exporters — Saudi Arabia, United Arab Emirates, Iran, Kuwait, Iraq and Qatar — curbed their output by 544,000 barrels a day. At the same time, their domestic demand increased by 318,000 barrels a day, leading to a loss in net exports of 862,000 barrels a day, according to the U.S. Energy Information Administration. Demand in the Middle East is a major factor right now, said Adam Robinson, an oil analyst at Lehman Brothers in New York. Mr. Robinson predicts the region will constitute more than 40% of increased demand next year.

EDIT

http://royaldutchshellplc.com/2008/05/29/oil-exporters-are-unable-to-keep-up-with-demand/

[DCKit]

1. Yet I've seen three different posts today discussing a tanker shortage.

It's tough to ship oil when the tankers are already full and sitting somewhere waiting for the next price spike before offloading.

Too bad Google Earth doesn't provide up-to-date photos. It would be very interesting to see where all the tankers are.

BTW, how do "Soaring profits from high-price crude..." lead to "...a boom in oil demand in Saudi Arabia and across the Middle East, leaving less oil for export."? WTF kind of BS logic is that? In any other market, they wouldn't be able to sell it fast enough. Are the citizens of Saudi Arabia buying it by the barrel and burying it in the back yard? Selling it at the Bazaar by the cup?

Oh, NOW I see the source - Royal Dutch Shell's very own propaganda site. Hell, I would have thought it was Rupert Murdoch's WSJ.

[GliderGuider]

2. A couple of things

First, that's not a Shell web site. It's an anti-Shell web site. Here is a list of some of the site's articles:

Contenders for the tarnished Shell crown
Shell employee safety: Propaganda vs. Appalling Track Record
Eminent former Shell Exec Paddy Briggs on: Anger at Shell's golden handcuffs
Guardian: ‘Dishonest, irresponsible’: Shell lambasted for pulling out of world’s biggest wind farm
Shell under investigation for potential violations of U.S. Foreign Corrupt Practices Act
Shell, Nigeria and the Record Price of Oil: The Biggest Scam in history?
Paddy Briggs: "The Tragedy of Corrib Gas"
The Internet humiliation of Royal Dutch Shell Plc

and:

DISCLAIMER: This is not a Shell website nor is it endorsed by Shell or affiliated with Shell in any way.

Second, regarding oil prices and exports: High oil prices mean more money and hence more GDP for exporters. Higher GDP means more money available for "doing stuff". More "doing stuff" raises the domestic demand for oil. Higher domestic demand may lead to lower exports if that demand is satisfied preferentially before the remainder of the oil is exported.

[n2doc]

6. Also, most ME countries subsidize internal gasoline prices

I think Iran's internal gas price is 40c a gallon...

http://www.washingtonpost.com/wp-dyn/content/article/2005/07/03/AR2005070301042.html

[GliderGuider]

9. Most nations that have nationalized their oil industries subsidize domestic consumption

That's one of the convenient advantages of nationalization -- it disconnects the domestic oil supply from international market pricing.

[eallen]

7. Oil tankers don't sit anywhere for long

AIS provides realtime information today on ship movements, and there are a few websites that let you track particular ships or all the shipping in a geographic region.

What Saudi Arabians are doing is what all people in other parts of the world are doing when they get richer: drive more, fly more, build (and air condition) bigger homes. All, consuming more energy. More people in oil exporting nations consuming more energy locally means less oil for export. That process is magnified by the fact that many oil exporting nations subsidize domestic consumption, by setting a domestic price below the world market.

[The Backlash Cometh]

3. You think anyone is complicating the matter by hoarding?

[GliderGuider]

4. How much oil would you need to hoard to make a difference?

The world uses 31 billion barrels of oil a year.

According to the EIA via Wikipedia the world maintains about 4.1 billion barrels of strategic reserves, of which 1.4 billion are national and 2.7 are private. That amounts to a paltry 48 days of global supply. Once again the problem of scale intervenes -- we use so so much oil that it would be utterly beyond the ability of an investor to hoard enough to affect the price.

Oil producers might be keeping it in the ground and artificially suppressing supply by not pumping all they could, but there's no evidence for that either.

[valerief]

5. We only use petrol because our leaders won't lead us to alternative fuels. nt

[phantom power]

8. Exercise: what happens if we scale an "alternative" to 30 billion barrels per year?

Or, for that matter, even 1/10th of that? In other words, try to produce 10% of what we currently use (and wave hands at what a 90% cut in transportation does to our current civilization).

[phantom power]

10. BTW, that is a nice reduction of the question

Assuming some kind of market-manipulation conspiracy pretty much demands the assumption that oil producers are keeping it in the ground, since it is traded on open markets once it is out of the ground, and there is no credible way to "hoard" it in meaningful volumes.