Where are the Barrels at Risk?


Last week, SAFE released the second Energy Security Fact Pack, which provides a comprehensive quarterly snapshot of the most important energy security trends. An overview of the Fact Pack and download link can be found here. After releasing the fact pack, many have expressed interest about one slide in particular, featuring a map showing where global oil supply is disrupted, or at risk, geopolitically or otherwise. The Barrels at Risk Map is a new analysis designed by the SAFE team to illustrate visually where oil supply is most and least vulnerable around the globe. Complementing the data-driven content of the rest of the Fact Pack, the map is supported by data from IEA and EIA, as well as the latest news reports, but also captures the sentiment of SAFE’s analysts regarding the stability and health of oil production in the countries in question. In addition to the current 2.8 million barrels per day (mbd) of global unplanned production disruptions, we considered the following factors when developing the map’s rankings:
  •      Levels of political instability and dissent: While the severity of politically-driven disruptions in Libya, Iraq, Nigeria, and Colombia has abated somewhat, the risks in Venezuela and Russia are now somewhat more elevated
  •      Internal political obstacles and infrastructure constraint: In the case of the United States, we observe regulatory uncertainty combined with a lack of pipeline capacity to keep pace with oil movements, as well as the logistical challenges created by the export ban
  •      Marginal production costs: In light of the oil price drop, high-cost production is threatened in a wide range of environments, from Canadian oil sands and the Arctic, to Brazilian and Angolan ultra-deepwater and U.S. tight oil
  •      Political vulnerability to falling oil revenues: Many of the Gulf states remain reliant on high oil revenues for most of their government budgets—as they are squeezed by low oil prices, we anticipate greater regional instability
  •      Historical unplanned supply disruptions in the country or region
Over time, we hope the Barrels at Risk Map will continue evolving and become an increasingly useful tool for helping analysts and the public understand some of the forces behind oil price fluctuations. Physical disruptions themselves have ebbed in the most recent quarter, which is a critical part of understanding the oil price slide of recent weeks. The return of Libyan exports has been the primary driver, along with modest improvements in Nigerian exports, and the resolution of Columbia’s disruptions. The index following the map, seen below,  provides greater detail on what factors support each country’s ranking (click image to enlarge).