The population of the MENA region at its least extent is about 381 million people, about 6% of the total world population. At its greatest extent, its population is roughly 523 million.
1. MENA’s oil production, as a percentage of world oil production, has not increased since the 1970s, suggesting that MENA really cannot easily ramp up production.
Figure 1. Middle East and North Africa oil production as percentage of world oil production. Figure also shows oil price in 2010 dollars. Amounts are from BP Statistical Report. Oil includes NGL; oil price comparable to Brent.
MENA’s oil production amounted to more that 40% of the world’s oil production back in the mid-1970s, but is now down to 36% of world oil supply. It is hard to see anything that looks like an upward trend in MENA’s share of world oil supply, even when high prices hit. OPEC talks big, but its actions do not correspond to what it says.
2. MENA claims huge oil reserves, but these reserves have not been audited, and there is little evidence that they can really be transformed into corresponding oil production in any reasonable time-frame.
Figure 2. World's "proven" oil reserves, according to BP Statistical data, split between Middle East, North Africa, and the Remainder of the World
Countries don’t all use the same standards when reporting oil reserves. Reserves of countries following SEC reporting requirements have historically been conservative, but Middle Eastern countries do not follow these standards. A small country with high oil reserves will appear rich to the rest of the world, and its leader will appear important in the eyes of local residents, so there can be a temptation to “stretch” the amount reported. There is no timeframe specified with respect to the stated reserves, either. If the oil is very heavy or difficult to extract, the expected extraction period could be hundreds of years.
3. Saudi Arabia has said it does not intend to increase its capacity for oil production.
4. While Saudi Arabia claims current production capacity of 12.5 million barrels a day, this amount is not audited, and its actual capacity is quite possibly lower. Its highest recent production is 9.84 million barrels a day.
When Libya’s oil production was taken off line, Saudi Arabia was not able to make up for the loss with the type of oil that the market required. Recently, Saudi Arabia made a statement that it would ramp up production to 10 million barrels a day, its highest in 30 years. Saudi Arabia did manage to increase its crude oil production to 9.84 million barrels a day in July, 2011, an increase of 700,000 to 900,000 barrels a day over recent months’ production. But even with this big ramp up, MENA crude oil production has not made up for the shortfall in Libya production (Figure 3). And of course, Saudi production is still far short of the claimed 12.5 million barrel a day capacity.
Figure 3. MENA Monthly crude oil production, based on EIA data.
5. MENA’s oil consumption is rising, so even if MENA’s production should rise, the rest of the world would not necessarily get much benefit from it.
Figure 4. Middle East oil production, consumption, and net exports, based on BP Statistical Data, from Energy Export Data Browser. Oil includes natural gas liquids.
The amount shown in green in Figure 4 is the amount of oil exports. These are declining, because consumption is rising, while production is flat. The above graphic is for the Middle East only, but MENA in total is showing a similar pattern of rising consumption leading to less exports.
6. Instability is a huge problem in the Middle East, leading to rising and falling oil production. This is especially the case for Iraq, a country which has planned large production increases.
Figure 5. Iraq oil production and consumption. Production from BP Statistical Data; consumption from EIA data.
7. High oil prices lead to high food prices, and a recent study shows that high food prices are associated with riots. So the high oil prices required to produce the difficult-to-extract oil are likely to sow the seeds of governmental overthrow (repeat of “Arab Spring”) and political instability in MENA countries.
Figure 6. Comparison of FAO Food Price Index and Brent Oil Price Index, since 2002.