The Evolution of Oil Trade: a Complex Network Approach

Trade in oil has undergone significant changes in the last 20 years: technical progress has allowed the exploitation of new and previously untapped fields, the emergence of new large oil importers, such as China, has shifted the traditional patterns of demand and supply, while the desire to diversify energy sources has favored the emergence of new important suppliers. This paper compares the topological properties of the network of crude oil trade in different points in time over the period 1995-2010. The analysis covers both aggregate measures (such as network density and centralization) and node-specific indicators (e.g. centrality) that allow to uncover the rise (demise) of new (old) important players. Accounting for the position of each country within the network provides valuable information above and beyond traditional trade measures such as market shares. To investigate whether oil trade has experienced a process of globalization or, rather, regionalization we look at the community structure of the network: the number of communities increases over time but so does the average geographic distance within each community, showing that along a regional component there are also strategic/political considerations at play. Results from an econometric exercise suggest that high oil prices increase the likelihood that high-production-cost exporters play a more central role in the network, thus reducing the power of traditional exporters.