Monday, February 27, 2006

US Addiction to Oil


My two last posts were trying to forecast future oil exportation for Saudi Arabia and Iran based on a population driven growth of domestic demand. I believe that demographic pressure is ultimately determining the long term trend in oil consumption (assuming a constant lifestyle). The US is the top oil importer with imports near 15 mbpd in 2004. Like most of the western countries, the US population growth is modest with a fertility rate around 2.0 and a population that could reach 420 million in 2050 (Note that Hispanics count for almost one-half of population growth) [1].

Fig 1. US population trend (src: UN)

If we look at the quantity of oil consumed per capita (Figure 2), the trend seems to be linear since the 80s with 24.5 barrels/capita/year and a slight increase of 1.5 barrels/capita/year every 15 years (the oil comsumption data is from the 2004 BP energy review [3]).

Fig 2. Oil consumption per capita per year. The dotted lines are two possible trends.

Problem is that the US domestic oil production is declining rapidly since the 1970 production peak predicted by King Hubbert. On Figure 3, we added the result of the Particle Filtering based on a Stochasctic Bass Model (SBM-PF) which gives an Ultimate Recoverable Ressource around 230 Gb (logistic growth rate K=6%).

Fig 3. US oil production: actual data plus the result of the SBM-PF model.

If we combine the first order model for the consumption per capita (Figure 2) and the predicted US production on Figure 3 we can try to predict future importation levels (Figure 4).
Fig 4. US production, consumption and importation forecast.

If oil consumption stays strong in the US and grows to 22 mbpd in 2010, the oil imports could reach 17 mbpd (80%) in 2010 and 20 mbpd in 2015 (85%).
Fig 5. Oil importation and exportation shares for the US.

Now, what would happen if only part of the oil imports can be satisfied? the result is shown on Figure 6 and demonstrate how dramatic the fall could be for different change levels in imports. Just for a 25% decrease in imports, the consumption per capita could become flat.

Fig 6. Collapse of the oil consumption per capita/year if only a fraction of the oil imports is available. The population model is the UN medium variant.

Nobody knows what are the consequences implied by a fall in the oil consumption per capita but historically we can observe a significant correlation between the GDP per capita variations and the oil consumption per capita variations as shown on Figure 7.

Fig 7. Annual Variations (year-to-year relative change in %) for the US GDP and the oil consumption per capita. The estimated correlation coefficient is 0.68. The GDP per capita is derived from the real GDP data of chained 2000 dollars [4].