{"id":295222,"date":"2010-02-08T14:19:00","date_gmt":"2010-02-08T19:19:00","guid":{"rendered":"http:\/\/www.businessinsider.com\/the-oil-export-crisis-has-arrived-2010-2"},"modified":"2010-02-08T14:19:00","modified_gmt":"2010-02-08T19:19:00","slug":"its-official-the-oil-export-crisis-has-arrived","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/295222","title":{"rendered":"It’s Official: The Oil Export Crisis Has Arrived"},"content":{"rendered":"

(This post originally appeared at the GetRealList<\/a>)<\/em><\/p>\n

Last March, my study of the effect of peak oil on U.S. imports had brought Mexico to the fore (“The Impending Oil Export Crisis<\/a>”). As our #3 source of imports, the crashing of its supergiant Cantarell field had put the future of our oil supply into serious jeopardy.<\/p>\n

The possibility that Mexico’s oil and gas exports to the U.S. could go to zero within seven years looked very real.<\/p>\n

As I explained in that piece, rising domestic consumption coupled with declining supply puts an ever-tightening squeeze on imports. I have found no evidence that policymakers are paying any attention to this critically important dynamic, but it is the very point of the peak oil spear.<\/p>\n

Were it not for the market meltdown and recession, it would have pierced our vital organs. Instead we felt a pinprick. Hardly anybody realized what it really was, and most ran off on a wild goose chase for evil oil speculators.<\/p>\n

Now Venezuela has appeared on my radar for similar reasons…only this time we’re really going to feel it.<\/p>\n

Let’s begin with a review of Mexico’s exports.<\/p>\n

Mexico<\/span><\/h3>\n

Shortly after publishing that article, I casually remarked to my friend and fellow energy analyst Gregor Macdonald that Cantarell’s production could fall to under 0.5 million barrels per day (mbpd) by the end of the year.<\/p>\n

I arrived at this somewhat startling conclusion by calculating the effect of its decline rate–at the time, 38% and accelerating–on production of 0.77 mbpd in January, down precipitously from its 2.1 mbpd peak in 2003.<\/p>\n

Gregor’s recent data sleuthing on Cantarell found its production in December 2009 was 0.527688 mbpd, just a hair above my estimate.<\/p>\n

To update the data on Mexico, it’s now our #2 source of imported petroleum because Saudi Arabia has fallen from #2 to #4. As of November 2009 (the latest data available) the U.S. imported 1.08 mbpd of crude and finished petroleum products from Mexico. Its exports to the U.S. peaked at 1.46 mbpd in 2004, the same year as its production peaked. Net exports (production minus consumption) fell to 1.06 mbpd in 2008.<\/p>\n

\"mexico<\/p>\n

For the years 2005 to 2008, Mexico’s exports to the U.S. declined by 0.51 mbpd. In 2010, supply is expected to fall to 2.5 mbpd–nearly half a million barrels per day less than 2009.<\/p>\n

Mexico nationalized its petroleum operations in 1938 in a constitutional amendment and handed over total control to the state oil company Petróleos Mexicanos (PEMEX), with predictable results.<\/p>\n

Oil now provides more than 40% of the country’s revenues, which have been used to pay for a vast array of public services and line the pockets of the oligarchy while starving investment in both upstream activities (new oil supply) and downstream (finished products).<\/p>\n

Consequently, Mexico’s oil reserves have decreased by more than 75% in two decades (owing partly to the correction of a previous, ridiculously inflated figure), production has begun to decline, and exports are falling fast. It now imports $4.5 billion a year worth of gasoline, $10 billion a year in petrochemicals, and 25% of its natural gas, mostly from the U.S.<\/p>\n

This despite having nearly 13 billion barrels of proven oil reserves and more than 50 billion barrels of (unproven) reserve potential. Mexico would be in a far better position, were it not for its hostile stance on foreign participation. PEMEX simply lacks the technical ability to develop its more difficult, remaining resources–particularly deepwater.<\/p>\n

Venezuela<\/span><\/h3>\n

As of November, the U.S. was importing 0.9 mbpd from Venezuela, making it our #3 source. Its exports to the U.S. peaked at 1.8 mbpd in 1997, the same year as its production peaked. Net exports (production minus consumption) have fallen 38% from the 1997 peak of 3.1 mbpd to 1.9 mbpd in 2008.<\/p>\n

Venezuela’s oil exports to the U.S. have been declining markedly since 2004, after a long period of relative stability. From 2004 through 2009, Venezuelan petroleum exports fell 0.7 mbpd.<\/p>\n

\"mexico<\/p>\n

Like Mexico, Venezuela is endowed with enormous energy resources, and could be producing at a far higher level. Estimates of its oil reserves range from 153 billion barrels of certified proven, to 513 billion barrels technically recoverable in the USGS’ January estimate, to 1.5 trillion barrels in offshore potential if you believe the effervescent Dr. Marcio Mello<\/a> of Brazil. Most of it is heavy oil, a low grade which must be upgraded to synthetic crude.<\/p>\n

And like Mexico, President Hugo Chavez has exiled the Western oil companies who might have made the investment to bring those resources to market.<\/p>\n

A Nation in Free Fall<\/h3>\n

The good times rolled for Chavez in the first years after his election in 1998. His socialist programs to rebuild the country and raise its the standard of living were popular, but expensive, and soon began to fail under the crush of declining energy supply.<\/p>\n

Oil revenues make up 90% of Venezuela’s foreign earnings, so its dependence on oil exports is extreme.<\/p>\n

Billions of dollars in profits from the national oil company, Petroleos de Venezuela SA (PDVSA) were diverted to welfare programs and into the pockets of oligarchs, while investment in future petroleum and power supply languished.<\/p>\n

The precipitous drop in oil prices since mid-2008 only compounded the revenue shortfall.<\/p>\n

Oil production has fallen 25% since Chavez was elected, and a long, devastating drought has cut into its hydropower supply, of which 73% comes from the massive Guri Dam.<\/p>\n

Chavez responded by nationalizing most of its petroleum operations and its grid in 2007.<\/p>\n

In 2009 another 76 oil services companies on the Maracaibo Lake were taken over. The projects now sit abandoned, waiting for PDVSA to compensate the displaced operators and put them back into operation.<\/p>\n

Almost half a million hectares of land were seized in 2009, with the rationalization that it was underused.<\/p>\n

Measures to counter the declining hydro supply have been implemented in a haphazard fashion, resulting in frequent, unscheduled blackouts, including seven national blackouts since 2007. Malls and government offices have had their hours of operation cut, and water rationing has been imposed.<\/p>\n

“Some people sing in the bath for half an hour,” Chávez cried at a cabinet session in October. “What kind of communism is that? Three minutes is more than enough!”<\/p>\n

In January, a wave of public protest erupted, prompting Chavez to implement a rapid series of desperate measures.<\/p>\n