Export Land Model Totally Explained

The Export Land Model, or Export-Land Model, refers to work done by Dallas geologist Jeffrey Brown, building on the work of others, and discussed widely on The Oil Drum. It models the effects of the decline in oil exports as a result of the peak in oil production in oil exporting countries while at the same time domestic consumption increases in those same countries. This combination of declining production and increasing domestic consumption leads oil exports to decline at a far faster percentage rate than oil production itself is falling.

Statement of the Theory

Assume that an oil producing country --Export Land-- produces 20 mbpd, consumes 10 mbpd, and exports 10 mbpd to oil consuming countries around the world.
Export Land hits the point of Peak Oil production, and over a five year period production drops by 25%. Over the same time period, Export Land's consumption increases by 20% to 12 mbpd. This causes Export Land's net exports over the five year period to fall from 10 mbpd to 3 mbpd, a decrease of 70% -- resulting from a combination of increasing domestic consumption in Export Land and a 25% drop in production. Counter-intuitively, the fractional decline in exports is much greater than the sum of the fractional increase in domestic consumption and the fractional decline in production.

The effect of peaking oil exports

As world oil exports approach (or pass) a global peak, the price of exported oil increases and further stimulates domestic economic growth and oil consumption in all Export-Land countries, creating a positive-feedback process between declining exports and higher prices. However after some point the declining level of exports outpaces the increasing oil price and domestic growth will slow. In some cases Export Land eventually becomes a net importer. It is unlikely that Export Land would constrain domestic consumption to help importing countries, in fact many oil exporting countries actually subsidize domestic consumption.

Real-world Application

The rapid decline of the UK from peak exports to net oil importer in just six years is sometimes referenced as an example of the Export Land Model in real-world action. Currently graphs of Mexico's oil production, domestic consumption and net exports appear to be closely corresponding with the expectations of the Export Land Model also.
Analyst Jeff Vail, in an April 2007 posting on his Energy Intelligence blog, titled Five Geopolitical Feedback-Loops In Peak Oil, explained the Export Land Model concisely thus:

“Export-Land” Model: Jeffrey Brown, a commentator at The Oil Drum, has proposed a geopolitical feedback loop that he calls the “export-land” model. In a regime of high or rising prices, a state’s existing oil exports brings in great revenues, which trickles into the state’s economy, and leads to increasing domestic oil consumption. This is exactly what is happening in most oil exporting states. The result, however, is that growth in domestic consumption reduces oil available for export. In states, such as Mexico, where oil production is also in decline, the “export-land” model predicts that oil exports will decline much faster than oil production—and this is exactly what is happening, with the latest PEMEX report showing 5% production decline year-on-year, but 11% export decline. Ultimately, the effects of the “export-land” model itself suffers from diminishing marginal returns—when exports shrink sufficiently, the oil-export revenue per capita will actually begin to decline (eventually reaching zero, no matter how fast prices rise), at which time the force behind rising domestic consumption will be eliminated.

External results

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