OPEC’s Export Revenue Falls 21% in 2001, Says EIA

VOL. XLV

No 27

8-July-2002

OPEC

OPEC’s Export Revenue Falls 21% in 2001, Says EIA

OPEC’s 2001 net oil export revenues are estimated to have fallen by 21% from 2000 levels to around $191.3bn, and for 2002 they are forecast at $177.7bn, or 27% below 2000 levels (see Table), according to the Energy Information Administration (EIA) of the US Department of Energy in its June 2002 report. With the estimated declines, OPEC net oil export revenues in real terms will return to the levels of the early- to mid-1990s, but will remain far below the levels from 1974 through 1985, prior to the oil price collapse of 1985-86. The EIA notes that this boom-bust cycle of oil revenues is making budgetary planning difficult in many OPEC countries, and also complicating efforts in many cases to deal with balance of payments deficits, accumulated debt, budget problems and rapid population growth.

For its 2002 revenue estimates, the EIA projects that the OPEC basket price, which has been above $22/B since March, will remain within the target range, with prices rising at the end of 2002 and in early 2003 before declining again in mid-2003. Lower or higher oil price case scenarios result in, respectively, lower or higher OPEC oil export revenue forecasts – possibly by about 10% in either direction. The EIA assumes that OPEC production will need to rise further over the rest of 2002 in order to prevent prices from exceeding OPEC’s target range.

OPEC Oil Export Revenue

		Nominal Dollars ($Bn)						Constant $2000 ($Bn)
	2001E			2002F		Change (%)	1972E			1980E		1986E		2002F
Algeria	11.0		11.1		1		5.5		27.5		7.2		10.7
Indonesia	3.8		2.9		-23		3.7		31.8		7.7		2.8
Iran	21.8		19.9		9		17.1		28.0		9.1		19.1
Iraq	14.9		13.1		-12		6.0		57.8		10.6		12.5
Kuwait	11.4		10.3		-10		11.5		40.1		10.0		9.9
Libya	11.0		10.6		-3		12.2		47.6		7.4		10.1
Nigeria	17.6		17.1		-3		8.7		51.0		10.2		16.4
Qatar	6.7		6.1		-9		1.8		11.4		2.3		5.9
Saudi Arabia	54.9		50.7		-8		19.3		223.2		31.2		48.6
UAE	18.0		16.9		-6		4.3		40.3		10.5		16.2
Venezuela	20.2		18.9		-6		12.7		38.9		11.1		18.1
TOTAL	191.3		177.7		-7		102.8		597.5		117.2		170.2

A sharp increase in oil prices during 1999, 2000 and the first eight months of 2001 resulted in dramatic improvements in OPEC countries’ economic situations, budgets and trade balances. Higher oil export revenues also lessened pressures for economic reforms and made it easier, for the first time in years, for OPEC countries to increase their spending significantly. While the higher prices are offset by the memory of the 1998 price collapse and an understanding in general that oil prices can be highly volatile, the pressures to make difficult political choices (like cutting popular state subsidies for food and fuel) tend to be lower during such relatively prosperous times.

For 2001, most OPEC countries had increased their oil price assumptions for budgetary purposes, ranging as high as $24/B in Indonesia, $22/B in Algeria and Nigeria, and $20/B in Iran and $20/B in Venezuela (MEES, 21 January). In most cases, these assumptions turned out to have been fairly realistic. For 2002, OPEC countries generally lowered their oil price assumptions, some (eg Saudi Arabia and Qatar) by only $0.50/B and others (Nigeria, Venezuela) by as much as $4/B. Maintaining fiscal discipline and pushing economic reform efforts appear to have gained in importance once again for most OPEC countries, but the question remains how willing and able countries are to take such difficult measures, notes the EIA.

In real terms (constant 2000 dollars), OPEC revenues peaked in 1980 at $598bn and registered the worst year in constant dollar terms since the early 1970s in 1998, when revenues fell to only $113bn (constant 2000 dollars), slightly below the previous low revenue year of 1986 ($117bn in earnings) following the oil price collapse of late 1985/early 1986. OPEC revenues for 2001 are estimated at about $186bn (constant 2000 dollars), which is less than one-third of 1980 revenues but around 64% higher than 1998 revenues. For the 1990s as a whole (1991-2000), OPEC oil export revenues (in constant 2000 dollars) were $1,600bn, compared to $2,400bn in the 1980s, and $3,300bn in the 1970s. Thus total OPEC oil export revenues in real terms during the 1990s were less than half of revenues in the 1970s.

Individual OPEC members’ shares of total oil export revenues have fluctuated over the past three decades, but several trends are apparent. First, Saudi Arabia has consistently earned more oil export revenues than any other single member of OPEC, with the Saudi share ranging from below 16% in 1971 to a high of 46% in 1981 and 29% in 2001. Second, Iran's revenue share fell after the 1978-79 Iranian revolution (followed soon thereafter by the Iran-Iraq War for much of the 1980s), and has not recovered since. Today, Iran accounts for about 11% of total OPEC oil export revenues, down from 17-19% in the 1970s. Third, Iraq’s oil export revenue share has fluctuated sharply, from a high of around 14% in the late 1980s, to basically 0% for several years following its August 1990 invasion of Kuwait. Iraqi oil export revenues have increased over the past three years or so under the UN oil-for-food deal, which permits Iraqi oil exports to buy food, medicine, and more recently other goods for other UN-authorized purposes. Iraq’s share of total OPEC oil revenues is now around 7-8%.

In inflation adjusted terms, OPEC per capita oil export revenues are far below the peaks reached in the late 1970s/early 1980s. For OPEC as a whole, per capita oil export revenues (in constant 2000 dollars) are projected at $327 for 2002, down 10% from the $365 per person figure for 2001, and less than one-fifth of the $1,816 per capita revenues achieved in 1980. The EIA notes that this has significant implications for OPEC oil price preferences and policies, especially combined with the fact that OPEC countries’ populations are growing rapidly and that many OPEC countries, despite their seeming oil wealth, are heavily indebted (in part as a result of low oil prices for most of the period from the mid-1980s through the late 1990s). As with OPEC oil producers, major non-OPEC producers also are affected by fluctuating world oil prices. Russian oil export revenues, for instance, surged in 1999, 2000 and 2001 after reaching a low point in 1998. This was the result of increases both in oil prices as well as production. Russian net oil export revenues are expected to increase by 3% in 2002 to $46bn. Mexico's oil export revenues, at around $11.4bn in 2001 (and a projected $12.2bn for 2002), remain significantly above the nadir reached in 1998 ($6bn).