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Export Land Model Example!

1) An exporting nation is modeled over 9 years, showing a 5% annual production decline and 3% annual domestic consumption growth, leading to a significant annual decline in exports. 2) After 9 years, the exporting nation will become an importer as domestic consumption exceeds production. As more exporters become importers, competition for remaining exported supplies will increase prices. 3) The high oil prices reflect the willingness of importing nations to outbid each other for limited exported supplies, not underlying production costs, as exporting countries prioritize domestic economic growth over exports.

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lupas100
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115 views

Export Land Model Example!

1) An exporting nation is modeled over 9 years, showing a 5% annual production decline and 3% annual domestic consumption growth, leading to a significant annual decline in exports. 2) After 9 years, the exporting nation will become an importer as domestic consumption exceeds production. As more exporters become importers, competition for remaining exported supplies will increase prices. 3) The high oil prices reflect the willingness of importing nations to outbid each other for limited exported supplies, not underlying production costs, as exporting countries prioritize domestic economic growth over exports.

Uploaded by

lupas100
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF, TXT or read online on Scribd
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Assumptions

Exporting Nation (Dennesland :P) Decline Rate % 0.95 5% decline rate


Year Production Consumption Exports Consumption Growth 1.03 3% domestic growth
1 2 1 1 Export Decline -27% WoW
2 1.9 1.03 0.87
3 1.805 1.0609 0.7441
4 1.71475 1.092727 0.622
5 1.6290125 1.12550881 0.5035
6 1.547561875 1.159274074 0.3883
7 1.470183781 1.194052297 0.2761
8 1.396674592 1.229873865 0.1668
9 1.326840863 1.266770081 0.0601
Analysis of Data
Export Land Model Notice that production decline is at 5%/yr
Export decline is 27%/yr which is very
signficant to the production decline.

2.5 After 9 years this country will start importing


Million Barrels of Oil

oil from other exporting nations.


What I produce
2
Mexico is the 2nd largest exporter of oil
Production to the United States. By 2014 they will
1.5 export ZERO oil to USA and will import oil.
Consumption
1 Exports The high oil prices is not the price of oil
Domestic Consumption that is used around the world, but it's the
0.5 I now Import oil and bid
price that importing nations are willing to
What I export to other pay for other nations to export them the oil.
countries against other countries
0 When more exporting nations become
importing countries then more players are
1 2 3 4 5 6 7 8 9 bidding up the remaining supplies of
Years declining oil exports.

Conclusion
Oil prices have touched $80/barrel last week and blew past it. Many are screaming on TV
That the "demand" fundamentals don't justify the current oil price. What these pundits don't realize
is it's not how much oil is produced, but how much oil is left to export! Countries rich in oil exports are
rapidly growing their economies and there will be less and less oil left after their domestic consumption
to export overseas to the mature developed nations. If these net importing countries want the oil then
they have to pay a higher price to have the exporting nation to give up some economic growth. This cost is
increasing as these countries are able to utilize the oil more efficiently and demand higher prices!
When these exporting nations run out of oil to export then they will join the world markets in bidding
the remaining oil left to export!

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