DEMAND FOR OPEC OIL AND OPEC CURRENT ACCOUNTS, 1976-80

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86T00608R000500180015-3
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 41
• Document Creation Date: December 12, 2016
• Document Release Date: March 5, 1999
• Sequence Number: 15
• Publication Date: August 1, 1975
• Content Type: IM

I ~ ~ ~ _ 0 ~ roved For Release ~0~I~1~A-RD i 6!~0~608R000500980015-3
or OPEC C)i~ and OPEC;~C~urrent Accounts,
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for C>f f icur! Ure Only
Intelligence l~~emorandum
Demand for OPEC Oil ~zyul O,~EC
? Current Account. 1976-80
ER IM 75-16
Augus: 1975
copy
N?_ 191
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NATIONAL SECURITY INFORMATION
Unauthorized Disclosure Subject to Criminal Sanctions
Clasalffed by 013919
Exampl from Gsneral Decla~~lflcoflon Schedule
of E.O. 11652 oxempllon calogoryt
?5B(li, (2), and (9)
Automaticallyy declaufffed om
data Impoulbb fo defermfne
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 For Offi is ~J ~n
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August 1975
Note to Holders of ER IM 75 16, Demand for OPEC 0 it
and OPEC Current Accounts, 197 - ugust
Gabon, which joined OPEC in Jtine 1975, is excluded
from the discussion of OPEC balance of payments (paragraphs
26-39) because the trade and payments data necessary to
make detailed estimates were not available. Exclusion
of Gabon has little effect on the OPEC totals because
production is expected to average only about 200, 000 b/d
during 1975-80. Gabon is therefore excluded from total
OPEC exports in Table 8. Gabonese production is included
in our estimate of Free World demand for OPEC oil' shown
in Tables 6 and 7.
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This memorandum estimates the likely demand for OPEC oil and the balance
of payments for OPEC member countries in 1976-80. It rests on analysis of trends
in (a) economic activity, (b) thc relationship of GNP growth to energy
consumption, and (c) the supply of alternative farms of energy. It assumes a stable
real price for OPEC oil -that is, a stable price in terms of all other commodities
in this five-year period. It further assumes the continuation of essentially the same
institutio-.rzl structures that now influence the international oil trade -for example,
the same degree of cohesiveness within OPEC.
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Demand for OPEC Oil
and OPEC Current Accounts
1976-8C
Our analysis of tltc demand for OPEC oil and of the likely state of OPEC
current account balances, 1976-80, yields the following major forecasts:
a. OPEC oil earnings in current dollars will likely increase from
US $107 billion in 1975 to $155 billion in 1980, with very little
change in the physical volume of oil exports.
b. OPEC non-oil export earnings will grow from $6 billion in 1975
to $19 billion in 1980.
c. OPEC earnings from foreign investment will rise from about
$7 billion in 1975 to $28 billion in 1980.
d. Even with further substantial growth in their imports, OPEC
countries as a group will continue to enjoy tremendous current
account surpluses in this period -rising from $49 billion in 1975
to a peak of $59-$65 billion in 1976-77, then falli~ig to just over
$30 billion in 1980.
e. Their combined official assets will mount from $74 billion at the
end of 1974 to $350 billion by the end of 1980.
All these forecasts are in current prices. We have assumed a price increase
for crude oil of $1..50 per barrel on 1 October 1975 and constant real prices
thereafter. We have also assumed a global inflation rate averaging 7%.
These huge current account surpluses and massive accumulations of foreign
assets will be distributed more and mire unevenly among the individual OPEC
countries. Tlus trznd will simultaneously augment the economic power of the richer
OPEC states, notably Saudi Arabia, and will increase the potential for divisiveness
within the cartel over pricing and allocation of production.
Note: Comments and queries regarding this memorandum are welcomed. They may
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By 1980, only five OPEC states -Saudi Arabia, Kuwait, the United Arab
Emirates, Iraq, and Qatar -will still have notable annual surpluses. The Saudi
surplus will be almost 50?lo greater than the balances of all other producers. Iran
will be in a strong financial position at the end of 1980. Altliougli its current
account surpluses will be greatly diminished by that time, Iran's foreign assets will
total nearly $50 billion. Libya and Nigeria will both begin running current account
deficits by 1978. At the end of the decade, Libya's cumulative surplus probably
will have vanished, while Nigeria's position will show some improvement. Indonesia
will manage to maintain a slight current account surplus throughout the period.
Algeria and Ecuador will have current zccount deficits throughout the period, while
Venezuela will face growing pressures beginning in 1978. By 1980, the combined
deficit of these last ih*ee OPEC members will probab~y rise to more than $5 billion.
The estimates of OPEC oil earnings are based on our assessment of the
international oil market between now and 1980. We believe that Free World imports
of OPEC oil will remain .n ere neighborh~~d of 27 million barrels per day (b/d)
in 1976-80 -dipping only in 1978 when Alaskan oil is expected to come on
line. Energy demand in the major developed areas -the iJnited States, Western
Europe, Japan, and Canada - is predicted to grow from about 74 million b/d
of oil equivalent in 1975 to 86 million b/d in 1980. romestic production and
net non-oil imports of these countries will increase from 48 million b/d of oil
equivalent to 62 million b/d in that period. As z group, other developed countries,
the non-OPEC LDCs, and the world shipping industry will have net oil imports
of 4 million b/d in 1975 and about 3 million b/d in 1980. The Communist countries
will continue to play a minor rolE in t"c international market, with net Free World
imports of Communist oil rising from 1.0 million b/d in ! 975 to perhaps 1.3 million
1;/d in 1980.
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Crowt/t Outlook in Ma;or Consuming Countries
1. The economic performance of major industrial countries will be the single
most important factor determining Free World oil demand over the next five years.
After declining during 1974 and the first half of 197,1, economic activity in most
major industrial countries is gradually righting itself. A mild aptiarn is anticipated
in late 1975 and extending into 1976. US output is rrow expected to fall by about
4% in 1975, while Canadian and West European activity declines slightly. Japanese
GNP, which had been growing at a 10% rate or better, declined in '.974 and is
expected to grow little if at all in 1975.
2. Because inflation has Pased and political pressures 4rising from
unemployment are mounting, we expect many OECD nations to institute
stimulative economic policies dr:ring the second half of 1975 or by early 1976
at the latest. Barring major financial upsets, the largest OECD economies -the
United States and Japan -should be recovering by late this year. The major West
European countries are expected to lag somewhat; by mid-1976 they should be
picking up steam.
3. The recovery will be slower than in other postwar recessions. OECD
growth in 1976 probably will be only about 4-1/2%, below lord-run growth rates.
West European GNP growth will likely be less than 4%, while the Japanese economy
should grow at about 5%. Stimulative policies should boost consumer lemand;
investment demand and exports will remain sluggish. Because the gap between
output and productive capacity is extremely wide in many instances, fixed
investment by manufacturing industries and utilities will be particularly slow to
respond. In addition, the need and/or desire of some nations -particularly Italy,
France, and the United Kingdom - to improve their trade balances will cause their
policymakers to withhold major stimulative measures until the recovery is firmly
established in the United States and Japan and perhaps in West Gerr;rany. The
economies and import capacities of the smaller developed countries and the
non-OPEC LDCs will remain depressed at least until demand for their exports ~s
increased by the recovery in the major countries.
4. C-ECD economic growth almost certainly will accelerate in 1977. ThF?
smaller industrial countries should be recovering by then, and th:, lagging ~:.~~tors
1
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in the major OECD courtrics -fixed investment and export demand -- should
bc; turning up. OECD growth could rise to nearly G`/o in 1977, somewhat above
the long-term rate. Growth should average about 5% in Western Europe and reach
7.~Io in Japan. US GNP growth is assumed ~o be about 6%. Beyond 1977, growth
in the OECD countries is expected to continue, although at a slower pace. Table 1
si`~ows the assumptions for GNP growth in each of the major regions in 1975-80.
Demand for Energy
5. Beginning in late 1975 and early 1976, economic recovery will cause
a rise in the demand for energy in major developed countries, although the rise
will be slower than the increase in economic activity. Prior to 1973, energy
consumption in the mgjor industrial countries grew slightly faster than the rate
of GNP growth. In 1970-73, OECD economic output grew at an average annual
rate of 4.6%, while energy consumption grew by 4.7 Jo. In the absence of the sharp
increase in energy prices induced by the OPEC oil price hike, energy consumption
would probably have continued growing at a rate slightly faster than GNP.
6. Higher energy prices and ncn-price conservation measures appear to have
caused a divergence between economic growth and energy demand growth in 1974;
we expect that this divergence will gradually widen because higher prices have made
energy efficiency an even more important long-term criterion for both investors
and consumers. We derived our estimates of total energy demand from an equation
that relates demand to GNP. Because energy demand historically has been more
stable than GNP, the equation we used related energy demand with afour-year
moving average of GNP. The equation was applied to each of the major
energy-consuming areas - tl~e Utiit~d States, Western Europe, Japan, and Canada.
The results were adjusted by an amount equivalent to the expected price-induced
savings in energy use in the various energy-consuming sectors of each geographic
region. Table 2 shows our adjusted estimates of energy demand for the United
States, Western Europe, Japan, and Canada.'
7. Total demand for energy in the United States, Western Europe, Japan,
and Canada is expected to reach roughly 86 million b/d of oil equivalent. Th:~
estimate is sensitive to the average growth assumed for the various OECD countries.
For example, if OECD growth in each of the five years being projected were one
percentage point higher than our assumptions, energy consumption in 1980 would
1. For further details on the procedure for forecasting demand, see Appendix A.
2
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approximate 90 million b/d. However, the demand for energy is not very sensitive
to changes in the pattern of economic grog ~.h over the five-year period 1976-80.
8. These estimates of energy demand arc substantially lower than projections
made Pryor to the Arab oil embargo. In 1973 the OECD Secretariat estimated
th;,t total primary energy consumption in industrial countries would grow 4.8%
ruuiually in 1973-80, reaching a~out 102 million b/d of oil equivalent. In this
memorandum, we estimate consumption will increase only 2.3% annually during
tha same period, thus obtaining a 1980 figure 16 million b/d below the earlier
OECD forecast. About 10 mirnon b/d of this reduction is due to lower average
rates of economic growth and 6 million b/d to savings induced by higher energy
prices.
Domestic Energy Sa~ppdies
9. Domestic energy supplies and non-oil imports in the United States,
Western Europe, Japan, and Canada are projected to increase at a 5% u~~rage rate
between 1975 and 1980, from 48.1 million b/d in 1975 to 61.5 million b/d in
1980 (see Table 3).
10. The domestic energy supply (including net non-oil imports) in the U~rited
States is expected to increase from 30 million b/d of oil equivalent in 1975 to
35.1 million b/d in 1980. The increase is largely attributable to the availability
of Alaskan oil and to stepped-up exploitation of other resot~*res. Production of
natural gas is expected to fall throughout this period. Our 1980 production figure
is from an unpublished FPC estimate that assumes gradual deco;rtrol of gas prices.
It is consistent with a fairly sharp rise in the discovery of new reserves during
1975-80. Because production continues to exceed reserve additions, however, gas
production declines at a decreasing rate throug}r 1980. With US energy demand
at 42.5 million b/d, oil import requirements in 1980 are projected at 7.4
million b/d.
11. The domestic energy supply in Western E:rope (including imported coal
and natural gas) is projected to increase from 11.8 million b/d of oil equivalent
in 1975 to 18.6 million b/d in 1980. P.::pansion of North Sea oil and gas
development, although less than had been anticipated earlier, will help boost the
share of these fuels in total supply (excluding imported oil) from 35% in 1975
to 45% in 1980. West European energy demand of 29.3 million b/d and domestic
supplies of 18.6 million b/d imply an oil import requirement of 10.7 million b/d
in 1980.
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Major Developed Countries: Projected Economic Growth Rates
1975-80
Average
Annual
1975
1976
1977
1978
1979
1980
United States
3.1
-4
5
6
5
4
3
Japan
5.1
0.5
5.0
7.5
7
5.5
5
Wester. Europe
3.0
-1
3.8
4.5
4
3
4
Canada
4.0
-1
3.5
6
6
5.5
4
Table 2
Major Developed Countries: Projected Energy Demand
Million b/d of Oil Equivalent
1975
1976
1977
1978
1479
1980
Total
73.5
75.0
76.7
78.9
82.7
86.3
United States
36.5
37.0
37.6
38.7
40.7
47..5
Western Europe
25.5
26.1
26.7
27.3
28.3
29.3
Japan
7.3
7.5
7.7
8.0
8.4
8.9
Canada
4.2
4.4
4.7
4.9
5.3
5.6
Major Developed Countries: Projected Domestic Energy Production
and Net 1Von-Oil Imports
Million b/d of Oil Equivalent
1975
1976
1977
1978
1979
1980
Total
48.1
49.8
52.1
55.5
57.9
61.5
United States
30.0
30.4
30.9
32.6
33.5
35.1
Western Europe
11.8
12.8
14.3
15.?
17.0
18.6
Japan
2.3
2.5
2.8
3.;
3.4
3S
Canada
4.U
4.1
4.1
4.1
4.0
4.3
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12. Cncr6ry production from domestic sources in ,Oapan and net non-oil
imports will grow from about 2.3 million b/d of oil cquivalcn: to 3.:? million b/d
during 1975-80. Coal will retain its position as tltc principal domestic energy
resource, while coal imports will increase 55?fo during this period. Nuclear and
Hydroelectric power will also make a substantial contribution to rising non-oil
energy consumption in Japan. Japan's oil import needs in 1980 should be about
5.4 million b/d.
13. The domestic supply picture in Canada will show little improvement by
1980. Total production and net non-oil imports are prujected to rise only 7.5%,
:rom 4 million b/d of oil equivalent in 1975 to 4.3 million b/d in 1980. Moreover,
practically all of this increase is expected to occur in 1980. Canadian energy demand
in 1980 of 5.6 million b/d coupled with estimated supply of 4.3 million b/d implies
an oil import requirement of 1.3 million b/d.
14. Increased oil production in the major developed countries between 1975
and 1980 will contribute 36% of the rise in OCCD energy production. The increase
from 12.6 million b/d to 17.4 million b/d is primarily the result of new production
from the North Sea and Alaska. Increased coal supplies will contribute about 30%,
rising from 13.5 million b/d of oil equivalent to 17.5 million b/d. Nuclear energy,
which will rise from 1.7 million b/d in 1975 to 4.5 million b/d in 1980, will
provide 21% of the total rise in supplies. Natural gas and hydroelectric power
together will account for 13% of the growth, adding 1 million b/d and 0.8 million
,b/d, respectively (see Table 4 and Appendix B).
Major Developed Countries: Projected Energy Supply, by Type
Million b/d of Oil Equivalent
Total
1975
48.1
1976
49.8
1977
52.1
1978
55.5
1979
57.9
1980
61.5
Uilt
12.6
12.9
13.2
15.1
16.0
17.4
Natural gas
14.9
15.1
15.4
15.5
15.5
15.9
Coai
13.5
14.2
15.1
15.8
16.5
17.5
Hydroelectric
5.4
5.5
5.8
5.9
6.2
6.2
NuclearZ
1.7
2.1
2.6
3.2
3.7
4.5
1. Including natural gas liquids.
2. Primary energy equivalent.
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15. I-Iigher energy prices and national policies promoting domestic energy
production have had a substantial impact on developed country energy supplies,
probably adding about 5 million b/d of oil equivalent to projected 1980 energy
output. Much of the anticipated rise in coal supplies is directly attributable to
higher oi! prices. US coal output is now expected to rise much more rapidly than
was anticipated before the embargo, while the postwar decline in West European
and Japanese coal production and consumption is expected to be reversed as a
result of }ugher oil prices.
16. Higher prices have had a much less demonstrable effect on projections
of oil and gas production, although they have undoubtedly slowed the decline
in US production and have clearly contributed to a more rapid exploitation of
West European natural gas reserves. Nuclear and hydroelectric power projections
for 1980 show few if any price effects because these energy sources typically require
lengthy planning and construction periods; the major impact of price changes will
show up af~er 1980.
Supply Position of Otlrer Free World Countries
17. As a group, otl-er developed countries (such as Australia and New
Zealand) and the non-OPEC LDCs together will still be importing oil in 1980.
Their oil consumption as ~:~ll as production will increase substantially - 37% for
consumption and 117% for production between 1973 and 1980. We estimate that
in 1980, this group of nations will be consuming about 9.2 million b/d ar~d
producing 7.6 million b/d.'
18. The projected oil deficit of the non-OPEC LDCs is about 1.1 million
b/d in ~ 980, down sharply from almost 3 million b/d in 1973. Individual LDCs
will become large net exporters and could elect to become members of the cartel.
Total oil exports by non-OPEC LllCs are expected to reach 3.7 million b/d by
1980. Bolivia, Mexico, Angola, Malaysia-Brunei, Trinidad and Tobago, Congo, and
Zaire are expected to export more than 2.4 million b/d, while Arab countries not
presently members of OPEC -Bahrain, Ev-,~pt, Oman, Syria, and Tunisia -will
export 1.2 million b/d. Oil-importing LDCs are expected to increase their imports
to about 4.8 million b/d, up from about 3.5 million in 1973.
19. Throughout the remainder of this decade, crude oil production in
Australia and New Zealand will probably remain stable at about 400,000 b/d.
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Consumption is projected to increase at an annual rate of 4.6`h, growing from
675,000 b/d in 1973 to 925,000 b/d in 1980. Oil import requirements thus should
rise abot~.t the same as consumption, reaching roughly 500,000 b/d ilt 1980.
I%rce World Demand fur !'mported Oll
20. Energy demand of the major developed countries of 86.3 million b/d
of oil equivalent coupled with dolncstic supplies (counting non-oil imports) of 61.5
million b/d irrtply an ail import requirement of 24.8 million b/d in 1980. Adding
the net import demand of the other Free World countries,(1.6 million b/d) gives
a total Frce World demand for imported oil in 1980 of 26.4 million b/d (see
Table 5). Demand reaches a low in 1978, when new oil from Alaska temporarily
depresses US import demand, which subsequently begins rising again. The major
shifts in imports are a gradual decline in West European and other Frce World
imports as North Sca oil and increased oil production by non-OPEC LDC: are
substituted. These reductions are partly offset by gradual increases in Canadian
and Japanese oil imports.
Free World: Projected Oil Import Demand
Million b/d
19751
1976
1977
1978
1979
1980
Total
20.9
27.6
27.0
25.5
26.7
26.4
United States
6.2
6.6
6.8
6.1
7.2
7.4
Western Europe
13.0
13.3
12.4
11.6
11.3
'10.7
Japan
4.9
4.9
4.9
4.9
5.0
5.4
Canada
0.1
0.3
0.6
0.8
1.3
1.3
Otlter2
2.7
2.5
2.3
2.1
1.9
1.6
1. Data leave been adjusted to account for large stock drawdowns during the first half of the year and do not
agree with those which could be obtained by subtracting domestic supply data (Table 3) from total energy
demand data (Table 2).
2. , Mainly net import demand by non-0PGC LDCs, and other developed countries.
21. We estimate that the combination of higher oil prices, slower economic
growth, and larger domestic supplie will reduce the demand for imported oil in
1980 by about 20 million b/d. f..~veral pre-embargo studies, including the 1973
OECD energy study, estimated that the major developed areas alone would have
imported at least 40 million b/d in 1980, or some 14 million b/d more than our
projection. We estimate that the other Free World countries probably would have
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had net imports of an additional ~ million b/d or so if economic growth had
continued at historic rates and oil prices hud remained low.
Free World Imports of Comnnu~lst Ul!
22. Net imports of Communist oil by Frcc World countries arc expected
to rise from 1.0 million b/d in 1975 to 1.3 million b/d in 1980. In making tflc
calculations, actual and projected Communist exports to the Frcc World have been
reduced by Communist imports -primarily Soviet and East European imports from
OPEC nations - to obtain net Communist exports. Communist countries could
provide about 5% of estimated Free World import requirements in 1980.
23. The largest contribution, 7710 of the total, is expected to come froth
the People's Republic of Cluna in 1980. Cliinesc exports of crude to Japan are
projected to increase from about 155,000 b/d in 1975 to tts much as 1 million
b/d in 1980. We expect that China will export only small quantifies of crude and
products to other countries.'
24. Net oil exports from the Soviet Union and Eastern Europe will be
approximately 300,00 b/d in 1980, a substantial drop from the 700,000 to
800,000 b/d net exports expected in 1975-77.?
Free World Demand for OPEC Oil
25. Free World imports of OPEC oil are expected to stabilize in the
neighborhood of 27 million b/d in 1976-80 as a result of expected trends in Free
World import requirements and net Communist exports (see Table 6). Our estimates
of the demand for OPEC oil are not radically different than those of other observers
(see Table 7). Most of the other forecasters appear to be assuming higher rates
of economic gowth in consuming countries, and this appears to have accounted
for most of the differences in the estimates. The Free World bill for OPEC oil
will continue to rise, however, as a result of anticipated further increases in the
nominal -but not the real -price of crude.
3. For details on supplies from China, sec Appendix D.
4. For details on supplies from the USSR and Eastern Europe, sec Appendix E.
8
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Free World: Projected Demand for OPEC Oil
_
Million b/d
1973
1974
1975
1976
1977
1978
1979
1980
Frcc World imports
29.1
28.4
2ti.9
27.6
27.0
25.5
2G.7
2G.4
Not Comrnunist trade
-0.5
-0.8
-1.0
-1.1
-1.2
-1.2
-1.1
-1.3
USSR-Eastern Europe
-0.5
-0.7
-0.R
-0.7
-0.7
-0.5
-0.3
-0.3
China
....
-0.1
-0.2
-0.4
-0.S
-0.7
-0.8
-1.0
Bunker uso'
1.2
1.2
1.1
1.2
1.2
1.2
1.2
1.2
Floating stock changc~
0.3
0.7
-0.7
0.1
0.1
0.1
0.1
0.1
Free World demand for OPEC oil
30.1
29.5
26.3
27.8
27.1
2S.6
26.9
26.4
1. Bunker fuel sold Uy oil axporting countries that Boos not uppcnr in import sts aatlca. Moat of thle fuel is used
by tankers transporting crude oil to the major consuming areas.
2. Accounts for changes in the volume of otl at sea.
Mlllion b d
1975
1976
1977
1978
1979
1980
CIA
26.3
27.8
27.1
25.G
26.9
26.4
Walter Lery
26.5
30.0
31.5
32.5
32.5
31.5
Morgan Guaranty
....
....
....
....
....
29.6
Irving Trust
28.6
27.3
24.7
24.7
24.7
24.7
Citibank
26.0
27.0
28.0
29.0
30.0
31.0
OPEC Balance of Payments
tail Exports
26. We expect OPEi oil earnings, in nominal dollars, to increase from $107
billion in 1975 to $155 billion in 1980. This scenario assumes an oil price increase
of $1.50 per banrel on 1 October 1975 and constant real prices thereafter. Inflation
rates for the Free World -and for OPEC oil -~ are projected at 9% in 1976, 6%
in 1977, and 5% annually in the remaining years. As explained above, we expect
the physical volume of OPEC oil exports to be fairly stable in 1976-80 (see
Table 8). The projected increase in earnings is thus the result of higher nominal
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OPEC Countr/os: 0!l Exports
prices. In real terms, the combined oil earnings of OPEC in 1980, while tremendous,
will be only about 10% greater than in 1975.
27. Although total demand for OPEC oil will remain about constant, it will
be necessary for some UPEC countries to cut production in order to offset
production increases in other countries. Increases in oil production and exports
can be expected in Indonesia, Iraq, Libya, and Nigeria for a total gain between
1975 and 1980 of 2.4 million b/d in these countries. The compensating cuts will
occur primarily in Venezuela and Saudi Arabia. The Venezuelan cuts -about
400,000 b/d will be taken for conservation reasons. The Saudi cut -about 1.5
million b/d - would be designed to bring OPEC oil supply in line with demand,
and thereby to support the cartel. Saudi Arabia would still be producing nearly
6 million b/d by 1980, less than one-half of capacity but enough to generate a
large surplus, as discussed below. This is, of course, only one of many possible
scenarios for the distribution of OPEC exports among producing countries.
Non-Oil Exports
28. OPEC non-oil export earnings will be increasingly important in the next
five years. We estimate an increase from $6 billion in 1975 to $19 billion in 1980
(see Table 9). This would result in a near doubling of the present 6?Io share of
total exports. Four producers will account for three-fourths of the increase:
10
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1
ALCF.NIA
974 1
0.6
975 1
0.7
976
0.7
1977
1.7
1970
2,1
1979
2.7
1900
3.3
ECUADOR
0.6
0.5
0.5
0.5
0.5
0.6
0.6
INDONESIA
2.2
1.0
2.4
2.0
3.6
4.3
5.0
IRAN
0.7
0.7
1.2
1.6
2.0
2.5
3.1
IRAQ
0.1
0.2
0.3
0.4
0,5
0.6
0.9
KUNAIT
0.3
0.4
0.6
0.6
0.0
0.9
1.2
LIBYA
0.1
0.1
0,1
0.1
0.1
0.2
0.2
NIGERIA
0.7
0.9
1.0
1.1
1.3
1.4
1.6
QATAR
0.0
0.0
0.0
0.0
0.0
0.0
0.0
SAUDI ARABIA
0.0
0.0
0,0
0.0
0.0
0.1
0.2
U.A.E.
0.5
0.6
0.0
0.9
1.1
1.4
1.6
VENE2URLA
0.4
0.5
0.5
0.7
1.0
1.3
1.5
OPEC
6.2
6.4
0.1
10.4
i3.0
16.0
19.2
A/gerla and Iran will increase their non-oil exports $2.6 billion and $2.4
billion, respectively, by 1980. LNG shipments beginning in 1976-77 will
account for most of the growth.
Indonesia and >/enezuela will increase non-oil exports $3.2 billion and
$1.0 billion, respectively, by 1980. In addition to the expected increases
in traditional exports of agricultural products and raw materials, industrial
products will play an increasing role later in the decade as current
development projects begin to come on line.
Imports
29. OPEC imports will continue growing throughout the decade, although
not at the dizzying pace of 1974 and 1975. We expect imports to rise from $54
billion in 1975 to almost $133 billior. by 1980 (see Table 10). Price increases -
the same as those assumed for oil -will account for about half the growth in
the import bill.
30. We expect annual import volume growth to drop from 35% in 1975
to an average annual rate of about 13% a year. While overall OPEC import volume
will grow at a relatively constant rate in 1976-80, growth in individual countries
will vary greatly because of substantial differences in export earnings, development
potential, and the availability of skills to carry out development plans (see
Table 11). In estimating imports, we believe it useful to break the OPEC countries
into three categories:
11
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Billion US $
1974
197:
1976
1977
1970
1979 1900
Arr,ERrA
h
'CUADOR
-3,7
-6.0
-G.2
-6,0
-7,4
-o.o -0
5
,
IN
nONF
'SIA
-0,0
-1.1
-1.3
-1.4
-1.5
.
-1.5 -I
G
,
,
IRAN
-9,9
-4.7
-5.0
-7,1
-0.5
.
-10.3 -12
3
IRAQ
-7.2
-10.0
-13.5
-16.G
-20,3
.
-24.5 -29
6
XUWAIT
-2.6
-4.0
-G.1
-7,4
-0.9
.
-11.0 -19
7
L
rRYA
-1.0
-2.5
-2.9
-3.5
-4.3
.
-5.1 -G
2
.
NICER
IA
-3.1
-4.0
-6.2
-7.0
-9.2
.
-10,0 -11
7
.
QATAR
-2.7
-5.3
-6.2
-7.7
-9,5
.
-11.0 -12
3
SAUDI ARADIA
-0.3
-0.5
-0.5
-0.7
-0.0
.
-0.9 -0
9
U
A
F
-3.6
-5.0
-7.1
-9,4
-11.4
.
-14,0 -17
0
.
.
..
VENEZUELA
-1.4
-2.2
-3.0
-4.0
-5.0
.
-G.0 -7
0
OPEC
-4.7
-6.3
-7,9
-9,2
-10.1
.
-11.0 -11
9
-35.0
-54.0
-66.7
-01.6
-97.0
.
-114.1 -132.0
Aigerla, Ecuador, and Venezuela.
These producers will togetl:~r be able
to sustain an average annual import
volume growth rate of only 4%.
Balance-of-payments problems through-
out almost the entire period are the
major constraint.
OPECCounh?les: lmports(f.o.b.J
ludonesia, Kuwait, Libya, Nigerin, and
Qatar. These countries will maintain
an import growth rate of about 13%.
Kuwait and Qatar have limited
development potential, while Libya
and Nigeria will face payments
difficulties after 1977. Indonesian
imports are already constrained by
payments factors.
Iran, Iraq, Saudi Arabia,
United Arab Emirates. We
members to increase at ar.
OPEC Countries: Import Volume
1976-80
Average Annual Rate
of Growth (Percent)
Algeria
1
Ecuador
2
Indonesia
14
Iran
16
Iraq
16
Kuwait
13
Libya
13
Nigeria
11
Qatar
~
Saudi Arabia
21
United Arab
Emirates
19
Venezuela
7
import volume of these cartel
average annual rate of 17%. They will be
less affected by financial constraints.
12
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Services and Private Trnnsfers
31. We expect that the OPEC net deficit for services and private transfers
will drop from about $8 billion in 1975 to $5 billion in 1978 and will rise to
$8 billion again in 198Q (see Table 12). During the next three years, the $14
billion projected rise in investment income receipts (see Table 13) will more than
offset the $5 billion increase in freight and insurance and the additional $6 billion
in other service payments. Tlus trend will probably be reversed in 1979 as the
buildup in producer assets, and thus in investment income, begins to slow.
19'14
1975
1976
1977
1976
1979
196_0
ALC~s'RIA
F
CU
0.0
0.1
0.3
0.3
0.4
0.4
0.5
,
ADOR
0.3
0.2
0.1
0.1
0.1
0.1
0.1
INDONESIA
I
0.5
0.7
0.9
1.0
1.1
1.2
1.3
RAN
IRA
0.9
1.2
1.7
2.0
2.4
2.9
3.5
Q
KIIWA
0.0
0.1
0.2
0.2
0,2
0.3
0.3
IT
LIBYA
0.?
0 .1
0. 1
0. 1
0. 1
0. 1
0 .2
0.8
0.8
1.0
1.0
1.2
1.4
1.7
NIGERIA
CJA
0.0
1.0
1.2
1.4
1.7
2.0
2.4
TAR
SAI
0.0
0.0
0.0
0. 0
0.0
0, 0
0.0
IDI ARABIA
U
A
F
1.1
1.5
2.1
2.7
3,2
3.9
4.7
,
,
?
VF
NF
2
0.1
0.1
0.2
0.2
0.2
0.3
0.3
,
.
UF.LA
OPRC
0.3
0.4
0,4
0.5
0.6
0.7
0.9
4.9
6.2
6.2
9.5
11.3
13.3
15.9
/nvestment lncome Receiptsl
1974
1975
1976
1977
1978
1979
196_0
ALGERIA
ECUADOR
0.1
0.0
-0,1
-0.2
-0.3
-0.5
-0.6
IND
0,0
0.0
0.0
0.0
-0.1
-0.1
-0,2
ONESIA
IRAN
0,1
0.1
0.1
0.2
0.3
0.4
0.4
IRAQ
0.4
1.1
1.9
2.7
3.~1
3.9
4.1
XUWAIT
0.2
0.4
0.7
1.2
1.6
1.9
2.2
L IRYA
0.9
1.3
1.9
2.5
3.1
3.6
4,4
NIGERIA
0. 2
0. 3
0. 4
0. 5
0. 6
0. 5
0.?3
QATAR
0.3
0.5
0.7
0,9
0.9
0.9
0.9
SA UDI ARAr?
0.1
0,2
0.3
0.4
0,6
0,7
0,9
IA
U
A
E
1.0
2,4
4,2
6.3
8.2
9.9
11.6
,
,
.
VF
NF
ZUELA
0.3
0.7
1.2
1,~
2.2
2.6
3.1
,
,
OPEC
0.3
0.6
0.6
0.6
0.5
0.3
0,1
3.9
7.7
11.9
16,7
20.8
24,2
27,2
1. Including interest payments on loans received by OPEC countries to finance balance?of-payments deficits.
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32. Estimates of individual services accounts were obtained as follows:
Freight and h~surance -The cost of moving goods from the ports of
foreign suppliers to various OPEC countries normally ranges from lU%
to 15% of the f.o.b. price. We assume that the freight and insurance
costs equal 12% of the f.o.b. value of imports to each country.
Investment Income - We assume that annual earnings on foreign
investments equal 8% of tlt~ acquisition value of assets.
Profit Reputriatloir -These outflows include repatriation of profits by
foreign oil concessionaires and service payments to comlia.nies operating
govern.:ient-owned fields. The profits repatriations in each time period
fully offset profits accrued on oil export sales, which were included
as a part of this value of oil export in the trade account.
Other Services -This category includes a wide range of payments and
receipts, including fees paid for foreign technology and services, interest
payment on past OPEC debt, projected borrowings, and private
remittances by foreign workers. Most of the increase in this category
will occur in Iran, Nigeria, and Saudi Arabia, where substantial growth
in the foreign work force is expected.
33. We expect grant assistance to drop from $2.6 billion in 1975 to $1.5
billion in 1980 (see Table 14). This decline will occur as (a) large transfers by
major Arab producers to front line Middle East countries taper off, (b) greater
use is made of concessionary loans to developing nations, and (c) OPF,C states
faced with financial constraints cut back their aid programs.
Current Account Balance
34. The estimates in Table 15 indicate an OPEC current account surplus
averaging nearly $49 billion a year from 1975 to 1980. The surplus will peak
in 1976-77 -with the recovery in world economic activity and high oil earnings -
and then decline as oil production levels off and imports continue to rise. We
estimate the cumulative OPEC current account surplus in the six years 1975-80
at $295 billion. If producers continue channeling the same proportion of their
14
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1974
1975
1976
1977
1970
1979
1900
ALGERIA
F.'CI/AADR
-0,1
0,0
0.0
0,0
0
0
0.0
0
0.0
0.0
rN.70NE^fA
0.1
0
1
0
1
.
,0
0.0
0.0
IRAN
0
0
,
.
0.1
0.1
0.1
0.1
IRAQ
.
-0
2
0.0
-0,3
-0,2
-0.2
-0.2
-0.2
KUWAIT
.
-
-0,2
-0,2
-0,2
-0,2
-0,2
-0
2
LIDYA
0.6
-0.2
-0.5
0
0
-0.3
-
-0,3
-0.3
-0.3
.
-0,3
NIGERIA
0
0
.
0
0
0.2
-0,1
-0.1
-0.1
-0,1
QATAR
.
-0
1
.
0.0
0,0
0,0
0.0
0.0
SAUDI ARADIA
.
-1
-0.2
-0.1
-0.1
-0,1
-0.1
-0,1
U.A.E.
.4
4
-U
-1.1
-1.2
-1.0
-0.0
-0.6
-0.5
VENE2UF.LA
.
-0
1
-0.5
-0.3
-n.2
-0.2
-0.2
-0.2
OPEL'
,
-3
0
-0,2
-0.2
-0.2
0.0
0,0
0.0
.
-2.6
-2.7
-2.2
-1.8
-1.6
-1.5
OPEC Countries: Current Account Balance
i. 1nc~umng military.
2. Excluding interest payments on loans received by OPEC countries to finance balnnte-0f-payments deficits.
surplus into foreign investments as in the past two years, their foreign official
assets will grow from $74 billion at yearend 1974 to $350 billion at yearend 1980.
35. OPEC's cuiTent account surplus and stock of foreign assets will become
more unevenly distributed each year. By 19$0, only five OPEC states - Saudi
Arabia, Kuwait, the United Arab Emirates, Iraq, and Qatar - will still have notable
annual surpluses (see Table 16). The Saudis' current account balance alone will
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OPEC Countries: Current Account Bol?nce, by Country
1074
1975
1976
----
1977
----
19%0
--
1979
1900
ALGERIA
-1
--
----
'---
ECUADOR
-0.1
-0.4
.7
-1'3
-1'S
-1.6
-1.5
INDONESIA
1.7
0.1
1
1
-0''~
-O.G
-0.5
-0,7
IRAN
13.4
0.0
.
11
6
1'0
U.9
0.9
0.7
IRAQ
3.6
3.6
.
5
1
10.G
7.4
5.1
1.1
XUWAIT
7
2
.
5.7
4.6
4.2
2
G
LIDYA
.
2
6
6.3
0
7.9
0.1
0.2
0.2
.
0.3
NIGERIA
.
6,1
.7
1.6
2.0
~
0
1.0
-0.3
-1.6
-2.2
QATAR
S
G
1
1
.
2.0
-0.4
-0.1
0.0
SAUDI ARADIA
.
25
2
.
1.7
1.0
1.0
2.0
2
2
U.A.E.
.
5.0
21.0
5.3
27.3
G
7
25.6
21.5
24.6
.
19.1
VENF.ZURLA
5.0
1.0
?
0
6
6.4
5.0
6.1
5,7
OPRC
73
0
48
0
.
-1.4
-1.0
-2.5
-3.3
.
.
G5.0
59.0
45.0
4~J.7
31.9
be almost SOIo greater than the balance of all other prr~ducers while their official
foreign assets will exceed $145 billion. Despite a projected decline in the volume
of Saudi oil exports -just over 2010 between 1975 and 1980 -and rapidly rising
imports, Riyadh will continue to run a substantial trade surplus. By 1980, annual
earnings on Saudi foreign assets will reach almost $12 billion - or 70% of the
expected value of Saudi imports.
36. Iran will be in a strong financial position at the end of 1980, although
its current account balance will be greatly diminished by that time. Iran's foreign
assets ,rill total nearly $50 billion.
37. Libya and Nigeria will both begin running current account deficits by
1978. At the end of the decade, Libya's cumulative surplus probably will have
vanished, while Nigeria's position will show some improvement. Indonesia will
manage to maintain a slight current account surplus throughout the period.
38. The three remaining cartel members -Algeria, Ecuador, and Venezuela -
will face strong balance-of-payments pressures. In 1975 their combined deficit will
total $600 million; by 1980 it will rise to more than $5 billion. We believe this
to be a minimum projection. The estimate for import growth in these countries
was constrained by both export earning potential and borrowing ability, thus
limiting th.; deterioration in their current account position. Because we assumed
that these countries will be producing at full capacity (except in Venezuela, when
output is limited by government policy), additional oil earnings are unlikely. To
16
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 Conf donti I
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the extent these producers can obtain additional financing - t'?~!!er through greater
borrowing on international capital markets or intr.:-0PEC loads -both import
growth and deficit levels could be somewhat larger. 1-Iowever, substantial loans on
a continuing basis from richer cartel members aprcar unlikely.
39. Projected current account balances for individual OPEC countries are
presented ~n Table 17.
17
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Table 17
OPEC Countries: Curren* Recount 13aZances
I3iZZion US $
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19
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iiiZZion US $
1974
----
1975
----
1976
----
1977
1978
1979
198
0
gATAR,
EXPORTS (F.O,D,)
2.0
1.7
2.2
2.3
2.4
2.4
_
2.5
OIL
2.0
1.7
2.2
2.3
2.4
2.4
2.5
NON-OIL
0.0
0.0
0,0
0.9
0.0
0.0
0.0
lMPOR;'S? (F.O,B,)
-0.3
-0,5
-0.5
-0.7
-0.8
-0.9
-0.9
TRAOF. RA LANCE
1.7
1.2
S.G
1.G
1.5
1.6
1.6
NF.T SER. + PVT. TRANS,
0.0
0.1
0.2
0.3
0.4
0.6
0.7
FRE.iCl1T AND INSI/RA NCR
0.0
-0.1
-0,1
-G.1
-0,1
-0.1
-0.1
INVEST"IRNT iNC2ME RF,C~:S
0.1
0,2
0.3
0.4
0.G
0.7
0.9
OTHER
0.0
0.0
0.0
0.0
0.0
0.0
0.0
GRANTS
-0.1
-0.2
-0.1
-0.1
-0,1
-0.1
-0.1
CURRF,NT ACCOUNT BALANCE,
1.6
1.1
1.7
1.0
1.8
2.0
2.2
SAUDI ARADIA
F,XPORTS (F.O.B.)
31.4
28.0
34.8
33.9
30.6
35.3
32.0
OIL
31.4
28.0
34.8
33.9
30.6
35.2
31.6
NON-OIL
0.0
0.0
O.G
0.0
0.0
0.1
0.2
IMPORTS? (F.O,D.)
-3.6
-5.0
-7.1
-9.4
-11.4
-14.0
-17.0
TRADE BALANCE
27.8
23.0
27.7
24.5
19,2
21.3
15.0
NF.T SE.4. + PVT. TRANS.
-1.1
-0.2
0.7
2.0
3.1
3.8
4.5
FRR.iCl1T AND INSURANCR
-0.4
-0.6
-0.9
-1.1
-1.~1
-1.7
-2.0
INVF.ST'4ENT .iNr,OMR RF.C'TS
i.o
2.4
4,2
6.3
6,2
9.9
11.6
OTf1RR
-1.7
-2.0
-2.6
-3.2
-3.'/
-4.4
-5. 1
GRANTS
-1.4
-1.1
-1,2
-1.0
-0.8
-O.G
-0.5
CURRENT ACCOUNT BALANCE,
25.2
21.6
27.3
25.6
21.5
24.6
19. 1
UNITED ARAB EMIRATES
F,XPORTS (F.O.D.)
7.6
7.8
9.6
9.7
9.8
10.8
11.2
OIL
7.1
7.2
8.8
8.0
0.7
9.4
9.G
NON-OIL
0.5
G.6
0.8
0.9
1.1
1.4
1.6
IMPORTS? (F.O.H.)
-1.4
-2.2
-3.0
-4.0
-5.0
-6.0
-7.0
TRADE BALANCE.
G.2
5.6
G.6
5.7
4.8
4.8
4.2
NET SER. + PVT. TRANS.
-0.1
0.2
0.5
0.9
1.2
1.5
1.8
FREICl1T AND INSURANCE
-0.2
-0.3
-0.4
-0.5
-O.G
-0.7
?0.8
INVESTMENT INCOME REC'TS
0.3
0,7
1.2
1.7
2.2
2.6
3.1
OTHER
-0.2
-0.2
-0.3
-0.3
-0.4
-0.4
-0.5
GRANTS
-0.4
-0.5
-0.3
-0.2
-0.2
-0.2
-0.2
CURRENT ACCOUNT BALANCE
5.8
5.3
6.7
G.4
5.8
6.1
5.7
VF.NE2UELA
EXPORTS (F.O.D.)
10.8
9.3
9.8
9.3
9.9
10.5
11.0
OIG
10.4
0.8
9.3
0.G
8.9
9.2
9.5
NON-OIL
0.4
0.5
0.5
0.7
1.0
1.3
1.5
IMPORTS* (F.O.B.)
-4.7
-6.3
-7.9
-9.'L
-10.1
-11.0
-11.9
TRADE BALANCE
6.1
3.0
1.9
0.1
-0.2
-0.5
-0.9
NET SF.R. + PVT. TRANS.
-1.0
-1.0
-1.1
-1.3
-1.6
-2.0
-2.5
FREIC!!T AND INSURANCE
-0.6
-0.8
-0.9
-1.1
-1.2
-1.3
-1.4
INVESTMENT INCOME REC'TS
0.3
0.6
0.6
o,G
0.5
0.3
0.1
OTllER
-0.8
-0.8
-0.7
-0.8
-0.9
-1.0
-1.2
CFANTS
-0.1
-0.2
-0.2
-0.2
0.0
0.0
0.0
CURRENT ACCOUNT BALANCE
5.0
1.9
0.6
-1.4
-1.8
-2.5
-3.3
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DETERMINO.NTS OF ENERGY DEMAND
In the period 1956-73, energy demand in the tree World grew generally in
line with real GNI'. It responded more sluggishly, however, during booms and
recessions, probably because enertry consumption relates closely to the stock of
energy-consuming producer and consumer durables. This consideration led us to
construct smoothed GNP time series for the United States, Western Europe, Japan,
and Canada. Pot each region, the smoothed GNP alue (designated SGNP) in each
year is a four-year moving average, as follows: SGNP = [GNP(-3) +
GNP(-2) + GNP(-1) + GNP]/4.
Given these series, we postulated that energy demand (designated ED) grew
in proportion to smoothed GNP - c.g., that [ED/ED(-1)] =X[SGNP/SGNP(-1)] and
that X had a value close to 1. To test this assumption, we used data for 1956-73
to estimate the proportionality f;;rtor X for each of the four major regions. In
all cases, X was close to unity, as we expected. Moreover, each equation fits the
hiss orical experience very well. All R' values are at least 0.99, and the standard
ern>rs are respectively 0.33 million b/d of oil equivalent for the United States,
0.45 million b/d for Western Europe, 0.22 million b/d for Japan, and 0.08 million
b/d for Canada.
We further tested each equation by predictinb energy demands in 1974. We
expected that in view of the suusiantial oil price increases in effect in 1974, our
equations would yield predictions higher than actual demands. This the equations
did, indicating the price increases and conservation programs caused reductions in
energy consumption of 6% in the United States, Western Europe, and Japan and
3% in Canada.
Because of the continuing adjustment to higher energy prices, we anticipate
that the energy demand reductions from predicted values will continue to rise
through 1980, albeit at a slow rate. Preliminary consumption information for the
first half of 1975 indicate that energy c:smand reductions from predicted values
remained at about the 1974 level in the United States and Japan but may have
slumped in Western Europe as strict conservation measures were relaxed.
Most of this initial reduction in energy consumption came about as a result
of easily applied measures such as adjusting thermostats in space heating and
A-1
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cooling, reducinE; drivin}; speeds, and decreasing lighting in honres and factories.
Potential savings from such measures were probably largely exhausted in 1974,
unless large new price rises, supply inlerruptiars, or new government steps cause
renewed public interest in enertry savinf~.ti. M;Uor additional roduclions in encrtry
use will rcquiro substantial capital invcstnrcnts by industries and consumers in more
cncrgy efficient producer and consumer goods.
13ccause of heavy reliance on imported oil, average relative enerby prices
incrcascd about fiQ`'~~ in Western L"uropc and Japan in 1974. These prices rose only
about 20`/x25"~, in the United Slates and Canada, w}-ere the potential for encrbry
savings is probably considerably larger. As a result of gradual deregulation of
domestic energy prices, however, we anticipate that relative Canadian and US enerfry
prices will continue to rise substantially through 1980, while further substantial
rises arc unlikely in Wcstcrn Europe or Japan. Bccausc relative cncrgy prices will
be rising throughout the period and the potential for savings is larger -particularly
in the area of gasoline consumption - we expect the rise in US and Canadian
cncrgy savings to fx; larger than those in Wcstcrn Europe. Although the potential
for cner~;y savings in Japan is the smallest, we anticipate fairly large reductions
-;, Japan for institutional reasons. For example, Japanese industries are likely to
be responsive to direct government pressures for introductin of cncrgy savings
techniques, even if not justified by normal business considerations. By 1980, we
believe that additional cncrgy demand reductions from the GNP-predicted trend
could total about 8h in the United States, 6%7% in Japan and Canada, and 5%6%
in Western Europe.
Equation-predicted cncrgy consumption, modified to account for incrcascd
prices and conservation mcasures in cacl~ of the four major industrial areas, arc
presented in Table A-1. As the table shows, in 1980 the total equation-predicted
demand for the four areas, as modified, is $G.3 million b/d.
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Major Ucvcluped Countriex: Prujccted L'nergy Demand
_^ ~ Million b/d of Oil Equivalent
1974
1975
1976
1977
1978
1979
1980
Total
Total predicted by
equation
76.6
78.2
79.8
81.5
84.0
88.1
92.2
Total reductions for price
changes and conservation
measures
-4.2
-4.7
-4.8
-4.8
-5.1
-5.4
-5.9
Total estimated demand
72.4
73.5
75.0
7G.7
78.9
82.7
86.3
Uniteu States
Demand predicted by
equation
38.5
39.1
39.7
40.3
41.6
43.8
45.9
Reduction for price change
and conservation measures
-2.1
-2.6
-2.7
?2.7
?29
-3.1
-3.4
Estimated demand
36.4
36.5
37.0
37.6
38.7
40.7
42.5
Western Europe
Demand predicted by
cquatiort
26.2
26.8
27.4
28.0
28.7
29.7
30.8
Reduction for price change
and conservation measures
-1.5
-1.3
-1.3
-1.3
-1.4
-1.4
-1.5
Estimated demand
24.7
25.5
2G.1
26.7
27.3
28.3
29.3
Japan
Demand predicted by
equation
7.6
7.8
8.0
8.2
8.5
9.0
9.5
Reduction for price change
and conservation measures
-0.4
-0.5
-0.5
?0.5
-0.5
-0.6
?0.6
Estimated demand
7.2
7.3
7.5
7.7
8.0
8.4
8.9
Canada
Demand predicted by
equation
4.3
4.5
4.7
5.0
5.2
5.6
6.0
Reduction for price change
and conservation measures
-0.2
-0.3
-0.3
-0.3
-0.3
-0.3
-0.4
Estimated demand
4.1
4.2
4.4
4.7
4.9
5.3
5.6
A-3
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AI'1'L:NDIX I3
ENERGY SUPPLIES OF MA.DOR DEVELOPED COUNTRIES
Domestic energy supplies (including non-oil imports) in the major developed
countries -United States, Wcstcrn L'suropc, Japan, and Canada -arc expected to
mow at an average annual rate of about 5`/o between 1975 and 1980. The largest
increases will occur in the latter part of the period, primarily as a result of increased
availability of Alaskan and North Sca oil. Supply projections for the major
developed countries arc shown in Table B-1.
Net domestic supplies of enerbry (excluding oil imports) in the United States
we expected to increase from 30 million b/d in 1975 to 35.1 million b/d in 1980.
The increase is largely attributable to the availability, beginning in late 1977, of
Alaskan oil and to the projected intensification of domestic coal exploitation.
Production of natural gas is expected to fall throughout this period. Our 1980
production figure, 8.8 million b/d of oil equivalent, is an unpublished FPC estimate
that assumes gradual decontrol of gas prices. The estimate is consistent with a
fairly sharp rise in discovery of new reserves during 1975-80. Because production
continues to exceed reserve additions, however, gas production declines steadily
through 1980. Gas imports from Canada are expected to bold steady; only small
quantities of Algerian LNG will be available, toward the end of the decade. Coal
exports will increase slightly, at a rate Less than that for domestic production.
The contribution of nuclear energy will more than double by 1980, yet will provide
only 6% of domestic supply. Hydroelectric power will retain its share of about
5% during 1975-80.
Western Europe
We expect total energy supplies in Western Europe (including imported coal
and natural gas) to increase from 11.8 million b/d of oil equivalent in 1975 to
18.6 mill:~n b/d in 1980. Expansion of North Sea oil and gas, although less than
has been anticipated, will boost their share in total supply (excluding imported
oil) from 35% in 1975 to 45% in 1980. Production of oil is expected to increase
fron,i about 700,000 b/d to 3.5 million b/d. Coal will probably remain the single
most important internal fuel source, with production holding fairly constant and
imports rising slightly in this period. Nuclear energy will be providing about 10%
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of supply in 1980, conrlrrrcd with 4"? in 1975. Only n snurll Lain in the production
of hydroclcctric power will occur.
Japan
Japanese cncrgy production from domestic sources and net non-oil imports
will grow from about 2.3 million b/d to 3.5 million b/d during 195-80. Domestic
production of coal and natural gas will probably remain constant. Coal imports
should rise about 55`/0, and imports of LNG arc cxpcctcd to increase from the
cquivalcnt of 200,000 b/d in 1975 to 400,000 b/d in 1980. The use of nuclear
cncrgy will jump from 4?~, to 11%, of projected domestic supply, and hydroclcctric
power will increase slightly to the cquivalcnt of 800,000 b/d in 1980. Indigenous
Japanese oil production may reach about 100,000 b/d by the end of the decade.
Canada can look forward to only a moderate growth in domestic cncrgy
supplies. Total production and net non-oil imports arc projected to rise 7.5%, from
4 million b/d in 1975 to 4.3 million b/d iri 1980. Moreover, all this increase is
expected to occur in 1980, with few changes between 1975 and 1979. Domestic
oil production will decline slightly if, as expected, govemmcnt tax and price policies
continue to hamper exploration and development. Production of natur;rl gas should
register only a moderate increase. By 1976-77, Canada is cxpcctcd to end imports
of US coal; coal's overall contribution to the energy supply probably will hold
steady at approximately 400,000 b/d. Small gains in hydroelectric and nuclear
ercrgy, totaling 200,000 b/d of crude oil equivalent, between 1975 and 1980 are
projected.
Methodology
The projections of energy supplies in Table B-1 were derived from a variety
of published sources, unpublished estimates, and projections made especially for
this memorandum. The principal published sources included reports of US and
foreign government agencies, trade associations, and the technical press. ~Cnergy
Prospects to I98S, published in December 1974 by the Organization for Economic
Cooperation and Development, was especially valuable in filling some of the gaps.
Unpublished estimates of the US Federal Power Commission and the National Coal
Association were used for some of the US natural gas and coal production figures.
B-2
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We made a special effort to update projections of hydroelectric and nuclear
energy production in all four country groups and of Wcst European oil and gas
production. Projections were made of annual end-of--year hydroelectric and nuclear
generating capacity through 1980 based on the most recent national development
plans. From these projer.tions, midyear capacities and annual clcctricity production
estimates were derived using average utilization factors for hydroelectric and nuclear
power observed in 1973-74.
Historical data in this appendix may vary slightly from data shown elsewhere
because of different conversion factors between tl~e various energy sources used
in some sources. Normal statistical units for each fuel were converted to barrels
per day of oil equivalent on a consistent basis where possible. In particular, the
heat value used for crude oil was 5.62 million BTUs per barrel. The primary energy
input equivalent of hydroelectric and nuclear power (the amount of oil which would
be required to generate an equivalent amount of clcctricity) was used for these
two energy sources. US oil production data include natural gas liquids, but exclude
refinery processing gain.
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Tnblc 13.1
Mojor 9eveloped Countries: Domestic Energy Production and Net Non-Oil Imports
1. Including natural gas liquids.
2. FEA, Monthly Energy Revtew, Jun 75 (avcragc of first four months of 1975).
3. Interpolated.
4. FEA, Project Indepcndcnce (business-as-usual projection) Icss estimated exports in the cast of coal.
$. FEA, Monthly Energy Review, Jun 75 (avcragc of lust four months of 1975) plus cstimatcd imports.
6. Projected from historical reserve-production ratios and assu-ning a lOga annual increase in finding rate to
cstimatc new discoveries plus cstimatcd imports.
7. Unpublished FPC cstimatc.
8. Naiional Coal Association estimate.
9. Prinary energy equivalent (10,300 BTU per KWH).
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PROJECTED OIL SUPPLY POSITION O'r NON-OPEC LDCs,
AN[l OTHER DEVELOPED COUNTRIES
As a group, the non-OPEC LUCs and other developed countries (such as
Australia, and Ncw Zealand) will still be importing oil in 1980. Oil consumption
as well as production by this group will increase substantially - 37% for
consumption and 117% for production between 1973 and 19$0. We estimate that
in 1980 these nations will be consuming 9.2 million b/d and producing 7.6 million
b/d (sec Table C-1).
Tlrc projected oil deficit in non-OPEC LDCs is about 1.1 million b/d in 1980,
down sharply from 3 million b/d in 1973. Individual countries will become large
net exporters, and most of this oil may well be available to OECD countries.
Supplies of oil from non-0PEC LDCs could meet 15% of the projected needs of
OEC>I) countries (other than Australia and New Zealand) in 1980, estimated at
approximately 25 million b/d: (a) Bolivia, Mexico, Angola, Malaysia-Brunei,
Trinidad and Tobago, Congo, and Zaire could provide more than 2.4 mi~lion b/d;
and (b) Arab countries not presently members of OPEC -Bahrain, Egypt, Oman,
Syria, and Tunisia -could supply another 1.25 million b/d.
Between 1973 and 1980, the crude oil output of non-OPEC LDCs is expected
to expand by about 13% annually, reaching 7.2 million b/d in 1980. The largest
jumps in production will occur in Egypt, Mexico, and Brazil -although Brazil
is projected to remain a net oil importer.
We project that oil consumption in non-0PEC LDCs will grow at an average
annual rate of 4.7% between 1973 and 1980, compared with the 8.2% rate for
the period 1969-73. This projection reflects our belief that economic growth in
the LDCs will be less rapid in coming years than in the recent past and that high
prices will encourage conservation in the use of oil and a small shift to other
fuels.
Projected growth rates of oil consumption differ greatly among individual
nations. Important producing countries such as Mexico and Egypt will not be under
the same constraints as certain nations that will have to import a large portion
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oi' their oil supplies - 1'or exantplc India, Taiwan, and the 1'hilippi~~es. Other
countries, notably Brazil :ur;.l South Africa, probably will havr. sufficient exhort
carnin~~ to pay for oil imports.
ror the non-UI'GC LDCs as a group, tic rapid growth in oil output f?romiscs
to reduce net imports from 3 million b/d in 1973 to about 1.1 million b/d by
1980. Twclvc countries will account for all oil exports. Non-OI'I:;C L,UCs will be
able to satisfy a portion of the import needs of OECD nations only if the surpluses
of individual producers arc channeled to these countries, leaving the needs ol'vther
LDCs to be satisfied by OPEC states.
Throughout the remainder of this decade. crude oil production in Australia
and New Zealand will remain stable at about 400,000 b/d. Consumption, on the
other hand, is expected to grow at an annual rate of 4.Gh, increasing from 075,000
b/d in 1973 to 925,000 b/d by 1980. Oil import requirements thus should rise
about the same as consumption, reaching 500,000 b/d in 1980. We believe OPEC
nations will provide the bulk of these rcquircr:,cnts.
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Non-OPIiC LDCs and Other Developed Countries:
Projected Oll Supply Position
Million b/d
1973
1980
Con-
sumption
Pro-
duction
Net
Exports
Con-
sumptlon
Pro-
duction
Net
Exports
Total
6.7
3.5
-3.3
9.2
7.6
-1.G
Non-OPEC LDCs
G.0
3.1
-3.0
8.3
7.2
-l.l
Latin America
3.1
1.G
-1.5
4.3
4.4
0.1
Afr,ic~
0.7
0.4
-0.3
I.0
1.3
0.3
iVc:tr East
0.3
0.6
0.2
0.5
0.7
0.2
Far East
1.9
0.5
?1.4
2.5
0.8
-1.7
Other Developed Countries
0.7
0.4
?0.3
0.9
0.4
-0.5
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Chinasc crude oil production is expanding rapidly, the result of more than
a dccadr of priority investment. From 570,000 b/d in 1970, output more than
doubled to 1.3 million b/d by 1974 and will reach an estimated 1.C million b/d
in 1975. We expect the industry to continue growing at more than 20`% a year
though 1980.
China's petroleum industry began to meet domestic demand fully about 1963.
The small quantities of crude imported by Peking since then from the Near East
and Albania apparently have been prompted by considerations of trade balances
and/or to ease oil transport to south China. In 1973 the Cl~incsc began exporting
crude to non-Communist countries. Japan, by far the main customer, took 20,000
b/d in 1973 and about 80,000 b/d in 1974 and has signed up for about 155,000
b/d in 1975. A pact will probably be signed by early next year to provide for
exports to Japan rising to perhaps 1 million b/d annually by 1980.
The percentage of future Japanese oil imports from the Near East and
Indonesia almost certainly wil! be reduced to make room for ~'hinese crude. In
the meantime, the Japanese have taken advantage of the availability of Chinese
oil to press down the price of Indonesian crude.
Peking refuses to join OPEC, presumably to preserve freedom to determine
output levels and export prices. China still lacks outlets to large world markets
other than Japan. Peking may be able to sell some crude immediately to major
oil companies seeking a cost advantage in their Far East operations.
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The USSR has adequate oil resources to meet increasing domestic needs and
to nwintain exports to Eastern Europe and the Wcst at or slightly above presenl
levels through 1980 (sec Table E-1 ). We believe, however, lhat the annual rate
of increase in domestic production will decline sharply during the next five years,
to less than 4`/~ per year compared with 6.5`/~ annually in 1971-75. At the same
time the average annual rate of growth in oil consumption probably will decrease
from about 7'/~ in 1971-75 to about 5`% during 1976-80 as the Soviets strive to
conserve fuel.
The Minister of the Petroleum Industry has announced a preliminary goal
for production of 12 million b/d in 1980. In view of the technological problems
coupled with Soviet devclopmcnt in remote and inhospitable areas, and the failure
during 1972-75 to meet oil production goals for the first time, we estimate that
Soviet crude oil output in 1980 will be 11.6 million b/d. In recent years the rate
of discovery of new oil reserves has fallen behind the rate of increase in production,
and the requirement for new production capacity to offset the depletion of old
Gelds is rising rapidly. Despite the rapid devclopmcnt of West Siberian oilfields,
increasing production from this area may, within a few years, be unable to meet
the treed for oil from new sources.
The USSR plans to provide about two-thirds of Eastern Europe's total oil
supply during the next five years, and deliveries will reach about l.5 million b/d
by 1980 (see Table E-1 ). Some of the oil that the USSR st.rpplics to Eastern Europe
is procured from OPEC countries, primarily Iraq, through barter deals. In 1974
the volume of OPEC oil procured amounted to only about 100,000 b/d, a drop
from 300,000 b/d in 1973. Much of the decline results from Soviet refusal to
pay hard currency to Iraq for its oil. By 1980, however, the USSR could obtain
some 400,000 b/d of OPEC oil. Iraq is to pay the USSR partly in oil for aid
in development of the North Rtrmaila oilfield, and Libya is likely to pay the USSR
partly in oil for military equipment:
East European crude oil production will remain stagnant through 1980 at
about 400,000 b/d. To meet rising demand for oil, even at a lower average rate
of annual increase than during 1971-75, East European countries will have to obtain
about 700,000 b/d of oil from OPEC countries in 1980, primarily via barter
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wherever possible but also by direct purchases (sec fable E-2). Thus, Soviet and
Last European demand for OI'L'C oil iuay total 1.1 million b/d in 19$0 while
their exports to the West will total only about l.h million b/d. Net exports to
the Free World thus arc expected to decline from about 800,000 b/d last year
to only about 300,000 b/cl in 1980.
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Table E-1
USSR: Estimated Oil Supply and Demand
Million b/d of Oil Equivalent
1973
1974
1975
1977
1980
Supply
Domestic production
8.4
9.0
9.6
10.4
11.6
Imports
0.3
0.1
0.1
0.2
0.4
Demand
Domestic consumption
6.4
6.8
1.2
7.9
9.2
Available for export:
2.3
2.3
2.5
2.7
2.8
To Eastern Europe
1.1
1.2
1.3
1.4
1.5
To other Communist
countries
0.3
0.2
0.2
0.2
0.2
To t}ie West
0.9
0.9
1.0
1.1
1.1
Table E-2
Eastern Europe: Estimated Oil Supply and Demand
Million b/d of Oil Equivalent
1973
1974
1975
1977
1980
Supply
Domestic production
0.4
0.4
0.4
0.4
0.4
lmports
1.4
1.5
1.6
1.8
2.2
From USSR
1.1
1.2
1.3
1.4
1.5
From other sources
0.3
0.3
0.3
0.4
0.7
Demand
Domestic consumption
1.55
1.65
1.75
1.96
2.3
Exports
0.2
0.2
0.2
0.2
0.3
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