Oil – are we running out? … Part 1

oil

Oil has been with us, in various forms, for thousands of years.  Extracting and refining oil became a serious business with the invention of the internal combustion engine in the 1850s.  Since then, the demand for oil (primarily for use in cars, trucks, buses, ships and airplanes) has risen steadily.  Companies who took advantage of this trend evolved to become the biggest and riches firms in the world (Exxon, Chevron, Shell, BP).

Countries where oil was discovered (Saudi Arabia, United Arab Emirates, Kuwait, Brunei, Venezuela, etc) were initially dependent on the multinational oil companies for the skills involved in exploration and production.  Over time, these countries acquired the necessary skills and then nationalized their oil industry. Now these NOCs (National Oil Companies) control approximately 70% of the world’s oil reserves and production (Saudi Aramco; Gazprom – Russia; NIOC – Iran; PetroChina etc).  With their relatively new oil-based riches, these countries have been investing in additional exploration, increasing their military strength and improving the quality of life of their citizens.  These developments have catapulted them to positions of significant financial and military strength.  To protect their new position, they carefully manage the world’s oil supply by increasing or decreasing production to keep the price per barrel at or above $100.  So, with the amount of money at stake and the consequences of that wealth, it’s not surprising that oil rights have been at the center of geopolitics for much of the 21st Century (e.g. the US decisions to partner with Saudi Arabia and then to defend Iraq and Afghanistan were largely aimed at protecting western oil interests from religious/terrorist groups in the Middle East.)

There’s little doubt that for the last 100 years, oil has been the world’s most important natural resource.  Without it our lives would be considerably less comfortable.  But despite the fear that we are depleting the world’s oil reserves (which culminated in the “oil crisis” in the 1970’s), there is no danger that we will run out of oil.  In fact, for the last 10 years, US oil reserves have been growing at the rate of 5-6% per year.  (In the Gulf of Mexico alone, 1 billion barrels of new oil have been found in each of the last 25 years.)   Furthermore, the USA, which consumes 22% of the world’s annual production, is steadily decreasing its oil consumption as alternate forms of energy are being made available (shale gas, solar power etc).

The bottom line is that for some time now the world has been finding more oil than we are consuming.  While control of oil reserves and production has changed hands thereby re-shaping world dynamics, the fact is that the world’s current oil reserves will last us 100+ years. (see chart below for year’s supply of oil by country) 

 

Top oil countries for reserves and   production:  2013
Reserves and production in billions of   barrels. 
Years of supply = reserves / current rate of   annual production
 

 

Annual  

Years   of

Country

Reserves

Production

Supply

Venezuela

297.6

0.88

339.7

Saudi Arabia

267.9

4.20

63.8

Canada

173.1

1.39

124.8

Iran

154.5

1.28

120.9

Iraq

141.3

1.06

133.5

Kuwait

104

1.02

101.8

United Arab Emirates

97.8

1.17

83.7

Russia

80

3.80

21.1

Libya

48

0.55

87.7

Nigeria

37.2

0.91

40.8

 
 
USA

30

4.38

6.8

source:     USA Energy Information Association 2013

Note:  the world’s leading consumers of refined oil are the USA, which consumes 7 billion barrels per year (22% of the world’s annual production) and China which consumes about 15%.  Projections are that China and India will eventually outpace the USA in terms of consumption.

 

 

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