The oil trade balance of the major regions
Europe, China and Japan (3-5% of GDP) are currently heavily dependent on fossil fuel imports, but their energy independence could increase as the share of renewables increases. China could particularly benefit from this transformation given its current leading position in the manufacture, innovation and deployment of renewables, as it accounted for more than 45% of the global production in 2017.
The United States is in a different position, as it is in the process of completing energy self-sufficiency while, at the same time, the entire American continent has an almost zero trade balance. This move towards energy self-sufficiency is largely due to the recent exploitation of non-conventional hydrocarbons on the North American continent.In contrast, the Middle East, North Africa and the CIS (Commonwealth of Independent States), of which Russia is the main member, are regions where net fossil fuel exports account for more than 25% of their GDP. Middle Eastern countries are highly dependent on fossil fuel rents and their economic diversification is limited. The Russian economy is larger and more diversified than that of all oil producers in the Middle East, but it is exposed to a certain risk because oil and gas rents constitute an essential component of the state budget, accounting for about 40% of tax revenues. Finally, African countries that are heavily dependent on fossil fuel rents also have insufficient resilience (low GDP per capita and limited financial buffers…). This results in notable differences in terms of exposure to energy transition risks and opportunities for each country and region. However, this matters for the analysis of all sovereign debt issuers given the geopolitical dimensions at stake, to which all regions are exposed at least to some extent. In particular given the fact that overall access to energy (or to export markets for non-diversified economies) is not only a matter of “GDP %” but a broader factor of socio-economic and political stability.
Félix Fouret, Carbon/Climate Analyst Sources: Beyond Ratings, IRENA