How Much Oil is Left?
18 September, 2017
This question is among the most crucial facing the world today, given the reliance on fossil fuels – and especially oil – in powering the modern global economy. Many forecasters have attempted to pinpoint the moment at which the world will reach “Peak Oil”, the point when global production finally begins to fall significantly and in a sustained manner. The implications of such an event are huge, since demand will increasingly outstrip supply, which will in turn lead to ever-increasing oil prices. However, arguments continue as to whether Peak Oil is imminent, or whether it is still many decades away.
Why is knowing the level of remaining oil stocks so important?
The ability to plan effectively for the future is vital to the success both of individual companies and of national economies. Large corporations and governments often find it difficult or even impossible to change course quickly – this is appropriately known as the “supertanker problem”, with reference to the slowness of such a large ship in making a tight turn. An organisation which is unable to forecast with confidence more than a short time ahead may seem successful while economic conditions remain good but is likely to have real problems in adapting to bumps in the road.
On an even larger scale, world geopolitics are dominated by the oil trade, with countries as diverse as the United States, Saudi Arabia and Nigeria all obtaining large incomes from oil. Should their oil supplies dry up, so will the associated income, with potentially serious results for national economies. The fuel protests in Britain in 2000 lasted for only a few days, yet led to huge queues at filling stations and many people being unable to get to work. A long-lasting disruption to the oil supply might result in more serious consequences.
Is there a consensus on the current oil supplies?
No, for several reasons. The Hubbert Curve invented by the economist M. King Hubbert in the 1950s to predict Peak Oil seemed to be a good model for several decades thereafter, and up to the 1990s it seemed likely to remain the most accurate way of forecasting how much oil was still in the ground. This changed with the realisation that oil could be obtained at economic rates from the huge shale deposits in many parts of the world.
Although local political and economic factors make large-scale shale oil production problematic in many places, this industry could change the balance of power in the oil world, with Western countries becoming far more self-sufficient and less dependent on oil from the often unstable regimes of the Middle East in particular. However, the fall in the world oil price from over $130 per barrel to around $50 in the last few years has changed the game once again, making it difficult or impossible to turn a profit from some shale fields.
How long will the Earth’s oil reserves last?
Although there is no way of giving an exact number since oil is by its very nature hidden underground, most oil companies and specialist engineers estimate that total oil reserves are currently somewhere between 1.2 trillion and 1.7 trillion barrels. Since current oil consumption is around 75 billion barrels per year, this suggests a further 40 to 50 years’ supply. There are several catches, however. Global oil use is increasing year by year, which may shorten the lifespan of the world’s reserves.
Conversely, major economies – with China especially significant here – are committing themselves to a massive increase in the use of renewable sources of energy, and a consequent cut in the use of fossil fuels. The world’s largest oil producer is Saudi Arabia, with Iraq second on the list, so any lengthy period of instability in this region could render several hundred billion barrels’ worth of oil effectively out of bounds. It is crucial to consider all these factors when making forecasts relating to the future of the world’s oil use.