Which Countries Are Damaged Most by Low Oil Prices?
This week’s chart looks at costs per barrel, exports, and total oil production.
The Chart of the Week is a weekly Visual Capitalist feature on Fridays.
Oil is by far the world’s most-traded commodity, with $786.3 billion of crude changing hands in international trade in 2015.
While low commodity prices can hurt any major producer, oil prices can have a particularly detrimental effect on oil-rich economies. This is because, for better or worse, many of these economies hold onto oil as an anchor for achieving growth, filling government coffers, and even fueling social programs.
If those revenues don’t materialize as planned, these countries turn increasingly fragile. In the worst case scenario, an extended period of low oil prices can cause the fate of an entire regime to hang by a thread.
Which Countries are Damaged Most by Low Oil Prices?
This week’s chart explores three key pieces of high-level data on the oil sector from 2015: the cost of production ($/bbl), total oil production (MMbbl/day), and the world’s top exporters of oil ($).
The general effects of these factors are pretty straightforward:
- Countries that have a high cost of production per barrel are going to find it tough to make money in a low oil price environment
- Countries that are major producers or exporters tend to rely on oil revenues as a major economic driver
- Oil producers that are major exporters also have to deal with another factor: the effect that low oil prices may have on their currencies
Here are some particular countries that are under duress from current energy prices:
Back in the Hugo Chávez era, things were better in Venezuela than they are today. Oil prices were mostly sky-high, and this enabled the socialist country to bring down inequality as well as put food on the table for its citizens. However, as the World Bank described in 2012, since oil accounted for “96% of the country’s exports and nearly half of its fiscal revenue”, Venezuela was left “extremely vulnerable” to changes in oil prices.
And change they did. Oil prices are now less than 50% of what they were when the World Bank wrote the above commentary. Partially as a result, Venezuela is having all sorts of problems, ranging from runaway hyperinflation to shortages in almost everything.
Venezuela’s cost per barrel isn’t bad at $23.50, but the country is the world’s ninth-largest oil exporter with $27.8 billion of exports in 2015. If oil prices were north of $100/bbl, Venezuela’s situation would be a lot less dire.
Russia is the world’s second-largest crude oil exporter, shipping $86.2 billion to countries outside of its borders in 2015. That’s good for 11.0% of all oil exports globally. Russia’s cost of production in 2015 was relatively low, at $17.30 per barrel.
But is declining oil revenue influencing foreign policy? It’s hard to say – but we do know that, historically, leaders have turned to nationalist projects during tougher economic times. In this case, Putin may have focused Russia’s national attention on Ukraine as a way to deflect from a less-than-rosy economic outlook.
All is not well in Brazil, where President Dilma Rousseff could be impeached by as early as next week.
Brazil is the ninth-largest producer of oil globally, pumping out about 3.2 million barrels per day. However, a bigger concern may be the cost of producing oil in the country. The production cost in 2015 was a hefty $48.80/bbl, among the most expensive of major oil producers.
The post-Olympics hangover will be a challenging one in Brazil, as it faces its worst economic crisis in 30 years. The largest country in Latin America had its economy shrink 5.4% in the first quarter of this year.
Nigeria, which will soon be one of the three most populous countries in the world, is also very reliant on oil revenues to prop up its economy.
The country has a $7 billion budget deficit due to lower oil revenues, and it recently also dropped its peg to the U.S. dollar on June 15th. The naira fell 61% against the dollar since then, wreaking havoc throughout the economy. Nigeria also recently lost its title of “Africa’s largest economy”, handing it back to South Africa.
Nigeria is the sixth-largest exporter of oil, with annual exports of $38 billion in 2015. Its cost of production is higher than average, as well, at $31.50 per barrel.
Canada’s economy is largely diversified, but it is also the world’s fifth-largest exporter of oil with $50.2 billion of exports in 2015. Costs are also high in the oil sands, and the average cost of production per barrel was $41.10 throughout the country.
The oil bust has dragged the energy-rich province of Alberta into a recession, and the Canadian dollar is also severely impacted by oil prices for multiple reasons. Alberta’s economy is about to have its largest two-year contraction on record, while the provincial government’s deficit has exploded to $10.9 billion.
Energy investment in Alberta is forecast to be about half of the total from 2014. Meanwhile, economic conditions elsewhere have also been impacted, as areas such as housing, retail, labor markets, and manufacturing have all felt the pinch.
Visualizing China’s Energy Transition in 5 Charts
This infographic takes a look at what China’s energy transition plans are to make its energy mix carbon neutral by 2060.
Visualizing China’s Energy Transition in 5 Charts
In September 2020, China’s President Xi Jinping announced the steps his nation would take to reach carbon neutrality by 2060 via videolink before the United Nations Assembly in New York.
This infographic takes a look at what this ambitious plan for China’s energy would look like and what efforts are underway towards this goal.
China’s Ambitious Plan
A carbon-neutral China requires changing the entire economy over the next 40 years, a change the IEA compares to the ambition of the reforms that industrialized the country’s economy in the first place.
China is the world’s largest consumer of electricity, well ahead of the second place consumer, the United States. Currently, 80% of China’s energy comes from fossil fuels, but this plan envisions only 14% coming from coal, oil, and natural gas in 2060.
|Energy Source||2025||2060||% Change|
Source: Tsinghua University Institute of Energy, Environment and Economy; U.S. EIA
According to the Carbon Brief, China’s 14th five-year plan appears to enshrine Xi’s goal. This plan outlines a general and non specific list of projects for a new energy system. It includes the construction of eight large-scale clean energy centers, coastal nuclear power, electricity transmission routes, power system flexibility, oil-and-gas transportation, and storage capacity.
Progress Towards Renewables?
While the goal seems far off in the future, China is on a trajectory towards reducing the carbon emissions of its electricity grid with declining coal usage, increased nuclear, and increased solar power capacity.
According to ChinaPower, coal fueled the rise of China with the country using 144 million tonnes of oil equivalent “Mtoe” in 1965, peaking at 1,969 Mtoe in 2013. However, its share as part of the country’s total energy mix has been declining since the 1990s from ~77% to just under ~60%.
Another trend in China’s energy transition will be the greater consumption of energy as electricity. As China urbanized, its cities expanded creating greater demand for electricity in homes, businesses, and everyday life. This trend is set to continue and approach 40% of total energy consumed by 2030 up from ~5% in 1990.
Under the new plan, by 2060, China is set to have 42% of its energy coming from solar and nuclear while in 2025 it is only expected to be 6%. China has been adding nuclear and solar capacity and expects to add the equivalent of 20 new reactors by 2025 and enough solar power for 33 million homes (110GW).
Changing the energy mix away from fossil fuels, while ushering in a new economic model is no small task.
Up to the Task?
China is the world’s factory and has relatively young industrial infrastructure with fleets of coal plants, steel mills, and cement factories with plenty of life left.
However, China also is the biggest investor in low-carbon energy sources, has access to massive technological talent, and holds a strong central government to guide the transition.
The direction China takes will have the greatest impact on the health of the planet and provide guidance for other countries looking to change their energy mixes, for better or for worse.
The world is watching…even if it’s by videolink.
Visualizing the Flow of U.S. Energy Consumption
From renewables to fossil fuels, we’ve visualized the diverse mix of energy sources that powered U.S. energy consumption in 2020.
Breaking Down America’s Energy Consumption in 2020
The United States relies on a complex mix of energy sources to fuel the country’s various end-sectors’ energy consumption.
While this energy mix is still dominated by fossil fuels, there are signs of a steady shift to renewable energy over the past decade.
This radial Sankey diagram using data from the EIA (Energy Information Administration) breaks down U.S. energy consumption in 2020, showing us how much each sector relies on various energy sources.
The Balance of Energy Production and Consumption
In 2019 and now in 2020, America’s domestic energy production has actually been greater than its consumption—a development that hasn’t taken place since 1957.
Last year’s numbers were severely impacted by the COVID-19 pandemic, seeing a 5% drop in energy production and a 7% drop in consumption compared to 2019. Total energy production and consumption for 2020 came in at 95.75 and 92.94 quads respectively.
The energy amounts are equalized and measured in quadrillion BTUs (British thermal units), also known as quads. A quad is a huge amount of energy, equivalent to 183 million barrels of petroleum or 36 million tonnes of coal.
So how is America’s overall energy production and consumption split between energy sources?
U.S. Energy Production and Consumption Share by Source
|Energy Source||Percentage of U.S. Energy Production||Percentage of U.S. Energy Consumption|
America’s new margin of energy production over consumption has resulted in the country being a net total energy exporter again, providing some flexibility as the country continues its transition towards more sustainable and renewable energy sources.
Fossil Fuels Still Dominate U.S. Energy Consumption
While America’s mix of energy consumption is fairly diverse, 79% of domestic energy consumption still originates from fossil fuels. Petroleum powers over 90% of the transportation sector’s consumption, and natural gas and petroleum make up 74% of the industrial sector’s direct energy consumption.
There are signs of change as consumption of the dirtiest fossil fuel, coal, has declined more than 58% since its peak in 2005. Coinciding with this declining coal dependence, consumption from renewable energy has increased for six years straight, setting record highs again in 2020.
However, fossil fuels still make up 79% of U.S. energy consumption, with renewables and nuclear accounting for the remaining 21%. The table below looks at the share of specific renewable energy sources in 2020.
Distribution of Renewable Energy Sources
|Renewable Energy Source||2020 Energy Consumption in Quads||Share of 2020 Renewable Energy Consumption|
The Nuclear Necessity for a Zero-Emission Energy Transition
It’s not all up to renewable energy sources to clean up America’s energy mix, as nuclear power will play a vital role in reducing carbon emissions. Technically not a renewable energy source due to uranium’s finite nature, nuclear energy is still a zero-emission energy that has provided around 20% of total annual U.S. electricity since 1990.
Support for nuclear power has been growing slowly, and last year was the first which saw nuclear electricity generation overtake coal. However, this might not last as three nuclear plants including New York’s Indian Point nuclear plant are set to be decommissioned in 2021, with a fourth plant scheduled for retirement in 2022.
It’s worth noting that while other countries might have a higher share of nuclear energy in their total electricity generation, the U.S. still has the largest nuclear generation capacity worldwide and has generated more nuclear electricity than any other country in the world.
Converting Energy to Electricity
The energy produced by nuclear power plants doesn’t go directly to its end-use sector, rather, 100% of nuclear energy in the U.S. is converted to electricity which is sold to consumers. Along with nuclear, most energy sources aside from petroleum are primarily converted to electricity.
Unfortunately, electricity conversion is a fairly inefficient process, with around 65% of the energy lost in the conversion, transmission, and distribution of electricity.
This necessary but wasteful step allows for the storage of energy in electrical form, ensuring that it can be distributed properly. Working towards more efficient methods of energy to electricity conversion is an often forgotten aspect of reducing wasted energy.
Despite the dip in 2020, both energy production and consumption in the U.S. are forecasted to continue rising. As Biden aims to reduce greenhouse gas emissions by 50% by 2030 (from 2005 emission levels), U.S. energy consumption will inevitably continue to shift away from fossil fuels and towards renewable and nuclear energy.
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