Is the World Running Out of Oil?

Is the World Running Out of Oil?

2021-02-25 19:00:00
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The fossilized organic compounds of ancient life on Earth certainly provide us with a convenient way to get around. We pump oil into our cars, argue about it in politics and wage wars about it. And that's without even playing a role in global climate change.

But politics aside, what happens if we just keep using oil? Will we ever run out?

The answer can be simplified to a simple 'no', but it is quite complicated. To begin with, we don't really know how much oil the earth has. There are a number of different ways to categorize oil, from proven reserves to those that are technically recoverable. And not even these all describe how much oil could actually be under the earth.

In addition, oil production is dependent on demand and technology development. Vehicles are becoming more efficient when it comes to using oil, while new technology such as electric cars or hybrids can also take a bite out of use.

What has been proven

When it comes to oil, many statistics focus on proven reserves. According to British Petroleum's 2019 Statistical overview of world energythe total proven reserves of the planet's oil at the time was 1,733.9 billion barrels. Annual global consumption in 2019 was approximately 35.9 billion barrels. A basic calculation shows that if proven reserves did not grow, and consumption remained constant at 2019 levels, it would only take 48 years – meaning there will be some time in 2067 – to use up those reserves .

The problem is that proven reserves represent only the oil that a particular region can theoretically extract based on the infrastructure planned or in place. This is just "the tip of the iceberg," said Steven Grape, who works with proven oil reserves for the US Energy Information Administration (EIA).

In other words, technology has a major impact on what is considered a proven reserve.

For example the extraction of bitumen, a very viscous form of petroleum, the Canadian Association of Petroleum Producers compares to "cold molasses", its technological capability has increased significantly over the past few decades, significantly increasing proven reserves in Canada. Other technological advancements over the decades, such as horizontal drilling or hydraulic fracturing (fracking), have also helped increase the world's proven reserves, despite an increase in global consumption (and in controversy).

Smooth definitions

As technology changes over time, agencies such as the EIA are also targeting what they call "technically recoverable resources" or TRR, a term that applies to oil that can be extracted using current methods and technology, but which may not be profitable. As a result, these are not necessarily big figures for determining how much oil is realistically available to us, but the figures for technically extractable oil exceed proven reserves in many regions. For example, the United States has 344.1 billion barrels of technically recoverable oil, according to a 2020 document by the EIA, compared to just 42 billion barrels of proven reserves.

Technically recoverable oil can also fluctuate widely in quantity.

"TRR estimates are very uncertain, especially in emerging plays where relatively few wells have been drilled," explains the Oil and gas supply module from EIA. "Early estimates tend to vary and change significantly over time as new geological information is obtained through additional drilling, as long-term productivity is clarified for existing wells, and as productivity of new wells increases with technological advancements and better. management practices. "

In the US, the number of technically recoverable oil reserves was estimated at about 143.5 billion barrels of oil in late 1990, according to the EIA. Despite rising production, that number has more than doubled.

"Technology and geological knowledge grew faster than US production, increasing estimates of technically recoverable resources over time," said Scott Lauermann, a spokesman for the American Petroleum Institute. "You can't take today's estimates of technically recoverable resources and estimate when we're 'running out', because those estimates are based on today's technology and known formations, not tomorrow's."

Meanwhile, there is an even larger category, namely undiscovered technically recoverable resources, meaning resources identified by the U.S. Geological Survey predicts attendance.

“Undiscovered sources are sources estimated to exist based on geology, geophysics, geochemistry and our familiarity with similar basins and rock formations. Their existence has not yet been proven through drilling, ”said Alex Demas, a USGS spokesman.

And even this is a whole host of other types of undiscovered or technically irreparable oil because of the way oil sits underground.

The end of oil or the end of the question?

Clark Williams-Derry, energy finance analyst at the Institute for Energy Economics and Financial Analysis, an organization whose goal is "accelerating the transition to a diverse, sustainable and profitable energy economy," says the oil of the earth finite, asking how long it lasts is not necessarily the right question. The question should be, how long do we want it and at what price?

In other words, proven reserves will always fluctuate with demand as demand dictates price. If the price were high enough, the cost of extraction would be worth it.

“There will probably always be a way to unpack it somewhere,” says Williams-Derry.

Demas agrees. The problem is mainly the cost. Some amounts of oil are simply very expensive to recover, ”he says. "As the price of oil falls, it becomes less attractive to produce."

Even high oil prices can be a double-edged sword for producers, as high costs can inspire consumers to look for other energy sources. High prices can stimulate the development of energy-efficient technology. Alternative fuel sources such as natural gas or renewable energy are also eating up the demand for oil. As much of the oil is consumed by vehicles, technological developments such as electric cars or hybrids also play a role in the demand.

"How much oil there is depends on the price, but how much demand there is also depends on the price," says Williams-Derry.

Signs of declining demand have started to appear in recent years, Williams-Derry says. And the COVID-19 pandemic has only accelerated this decline in demand as the number of cars on the road has decreased significantly over the past year. It is difficult to predict what will happen next.


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