10 Oct Analysis: GDP per barrel of oil consumed
Methodology: The numbers presented are the product of the Gross Domestic Product division in U.S. dollars by the number of barrels of oil consumed by a country in a calendar year.
E.g., China RATIO (2019) = (Chinese GDP in US$ 2019 / Barrels of oil consumed in China in 2019)
Important: This is an exercise to obtain a ratio that allows the uniform of oil impact in the national accounts; we do not assume that oil is the only source of energy used by the countries analyzed.
- GDP data: World Bank (GDP current $)
- Energy consumption data: B.P., Statistical Yearbook 2020 (Oil Consumption Barrels).
The purpose of this analysis is twofold:
- Economic: Compare the efficiency of each economy transforming inputs. Understand if there are coincidences, convergences between countries analyzed.
- Environmental: Attempt to determine if it is possible to maintain the level of growth and meet the debt obligations of the countries and, at the same time, replace oil with clean energy.
Based on the above table and referring to the first motivation for this analysis, we can state the following:
- Countries in which the GDP/barrel of oil ratio are higher are those with higher value-added embedded on their exports, with greater industrial technification, and a more significant financial services component in relation to ist GDP.
- Countries with the lowest ratio are those that either have an abundance of oil resources (Saudi Arabia, Russia), with a low-tech industrial sector (India), or a higher percentage of the primary sector within the total GDP (Argentina).
However, when comparing between 2019 and 2009, the countries that have increased the ratio the most are Russia and China (6.72 and 4.09 times, respectively). The explanation may lie in the increase in the added value of the goods produced or in taking advantage of the opportunity to improve, that is, moving from rudimentary processes to others that are a little more technologically advanced, a process that was no longer possible in industrially developed countries (Germany).
The graphic representation of the table above is like this:
Out of which we can differentiate two groups:
- Switzerland, Germany, Japan, the Netherlands, and the United States
- China, Poland, Argentina, Mexico, India, Russia, and Saudi Arabia.
To answer the second question, regarding the capacity to repay the sovereign debts contracted while decreasing oil consumption, we will take one country from each group as an indicator. From the first group, the United States, from the second group, Mexico.
According to Trading Economics, the total foreign debt of the United States amounts to 5,371,451 million euros, that of Mexico to 446,898.10 million U.S. dollars.
Maintaining our initial consideration by which we use the ratio of GDP barrels of oil, the number of barrels required for the repayment of the foreign debt (we insist, maintaining the current ratio), would be as follows:
Legend: Country, Debt in US$, GDP created per consumed barrel, Number of barrels required, years.
The United States would need to extract 10.25% of its proven oil reserves (almost 69 billion barrels) and Mexico 184.74% of its reserves (nearly 6 billion barrels) to cover its foreign debt, assuming that they would devote all their income to paying it, which is impossible.
The above is a non-scientific conclusion; it is only an indicator of the pressures that energy use will put on certain countries; in the case of Mexico, its energy transformation is a necessity not only for environmental reasons but also for financial ones, its dependence on external energy sources will make it susceptible to external shocks and the increase in the cost of living for its inhabitants.
In the case of the United States, the increase in reserves and inventories from fracking as an extraction process places it in a less compromised situation. However, this industry –oil fracking– depends mainly on government subsidies because its high extraction price per barrel makes it unviable to compete with countries like Saudi Arabia or Russia.
We can also assure that debt will continue to grow (Q.E. and Post-COVID bond purchase, financed by the Federal Reserve and the ECB). Economic activity under current growth models at all costs will only decrease the use of fossil resources through increased productivity.
Incorporating clean energy on your initiative in resource-rich countries or countries with large populations looks complicated. Technologies that incorporate renewable sources require active training of the labor force, not to mention that in energy-intensive processes such as steelmaking or aeronautics, there are not yet fuels capable of generating a similar return to fossil fuels.
Article wrote by Juan Carlos Golindano for Datonomía on October 1st, 2020.