Without Russia

Olga Florenskya - Happy New Year 2005Where would the world be without the extraordinary growth in Russian oil supply, this decade? Not in a good place, actually. Russia’s near 50% oil production increase since the year 2000 did alot of heavy lifting.  And it’s concerning that this very fast growth rate has now topped out.

North American crude oil production (Canada + US + Mexico) saw, during the current decade, its highest levels in 2003 at an annual average of 11.358 Mb/day. The high month of production that year was in September, at 11.450 Mb/day. In that year, 2003, the average price of oil was 31.08. But by 2008, North American crude oil production had fallen to 10.338 Mb/day. Thus, as the price of oil went from 31.08 in 2003 to the 2008 average of 99.67, North American crude oil production lost over a million bbls a day.

Based on data through June of this year, we have currently fallen a bit further, to 10.226 Mb/day. But by cobbling together myriad recent reports from EIA Weeklies, JODI, IEA Paris, and PEMEX reports, it’s likely that we are now slipping below 10 Mb/day.

The North American block highlights what happened to the Non-OPEC block, especially when we take out Russia. And that’s this: the internal structure of Non-OPEC supply essentially peaked early in the decade, in the 2003-2004 period. Only Russia, with its latent supply hangover from the previous recession and financial crisis, was able to burst onto the scene in the 2003-2004 period – thus masking what was happening in the rest of Non-OPEC.

For the past 12 years, Non-OPEC supply has floated between 56.00% and 60.00% of total World supply. But inside of Non-OPEC, it’s been Russia–and only Russia–that’s allowed for Non-OPEC to create its 5 year supply plateau. Indeed, Russia started the decade contributing only 16% of total Non-OPEC supply. But by the production highs of 2008 in OPEC, Non-OPEC, and in World totals, Russia zoomed to provide nearly 23.00% of Non-OPEC supply.

Consider this: without Russia, Non-OPEC oil production would have fallen each year–just as North America fell–steadily into the face of a dramatic price rise in oil from 31.00 to 100.00 (averages). But even with Russia’s extraordinary rescue mission to world supply, Non-OPEC was not able to raise production on a sustained basis after 2004. You can’t raise world production to new highs without Non-OPEC, which currently provides 58% of world supply. And Russia alone cannot get Non-OPEC to new highs.

Total North America, Total Non-OPEC (with Russia), and then OPEC (with Saudi Arabia). In contrast to all the vast detail of global oil supply, the message is really so very simple.


Olga Florenskaya, Happy New Year, 2005.