The world's remaining oil reserves and where the reserves are located and how long an adequate oil supply will be available are discussed. Peak Oil is now occurring (or is about to occur!) and a serious oil shortage is developing. Fuel prices are moving up rapidly and that rise is likely to continue.
In 1956, geophysicist Dr. M. King Hubbert of Shell Oil made a prediction for which he was widely ridiculed. He predicted that U.S. oil production would peak in 1970. Among the "bewhiskered experts," this was consider another "chicken little" prediction about oil reserves similar to others that had been made over the years. These same experts were startled in 1970 when oil production in the U.S. did peak and then began a steady decline (U.S. natural gas production peaked in 1973 and is also continuing to decline).
Presently, the continental U.S. has about 30 billion barrels of proven oil reserves.
Hubbert is now deceased but recently, a disciple of Hubbert, petroleum geologist, Kennith Deffeyes, made an even more startling prediction that world Peak Oil production would occur on Thanksgiving Day 2005! This time the experts didn't laugh. It appears, indeed, that the time of "Peak Oil" production is approaching. The consequences of peak production finally arriving will be shocking to the world economic system. Needless, to say gas prices at the pump will soar!
Thanksgiving Day, 2005 has now long passed and it does not appear that Peak Oil occurred on Thanksgiving, 2005. And, indeed, with the past two winters being close to record warmth, the arrival of Peak Oil has been delayed. (Also, count the success of mining Canadian oil sands for part of the delay.)
But Peak Oil is inching closer so be ready. (Recent advances in alternative fuel technology for LNG, GTL, oil sand, solar energy, and the new giant oil field discovered last year in the Gulf of Mexico, gives one hope that, if we can just hold off Peak Oil for another few years, we may be able to mitigate, somewhat, the impact when it does occur - See Alternative Energy Sources, LNG - Liquefied Natural Gas, aand Hybrid Car for more information.)
Hubbert's Law states that oil production from an oil field peaks when one-half of the oil has been removed. When applied to world oil production in general, the meaning becomes ominous: when about one-half the oil on earth has been produced, total oil production will begin to fall. This will produce serious economic complications which will greatly impact mankind in general.
One source has predicted a severe oil supply-demand gap with blackouts becoming common by 2008.
This web page reviews the few options the U.S. and the world have for coping with the impending oil supply shortage. Actually, if one reviews the movement of oil prices over the past few years, it appears that "impending oil supply shortage" may not be the right word to use in the preceding sentence. The world oil shortage may have arrived!
In terms of the oil shortage, the U.S. has gotten itself in the kind of trouble that people shouldn't find themselves in.
Oil prices increased one-third in 2004, one-third in 2005, and has continued to increase at about the same rate. Since 2001, prices have more than tripled. The prices will be going even higher in the future as oil supply shrinks!
In order to meet the huge increase in fuel demand discussed above, the EIA expects OPEC oil production to double to keep pace with demand. Who are they kidding? This is like believing in Santa Claus or the tooth fairy. It just isn't going to happen. Discoveries of major oil deposits seldom happen anymore (although the recent strike in the Gulf of Mexico was impressive). Worldwide, the discovery rate peaked in 1964 and world oil production is expected to peak in the next few years.
Oil Production in U.S., Russia, North Sea, and OPEC. U.S. oil production peaked in 1970, Russian production peaked in 1987 and has been on a sort of up and down plateau since. Great Britain North Sea production has peaked and is forecast to decline rapidly. Norwegian North Sea production is approaching the peak.
The only oil-producing countries where production has not yet peaked are some of the OPEC nations. However, twenty years from now, OPEC production will be on a downward slope from which there is no return. Probably, it will happen sooner and, very possibly, much sooner.
Oil Supply from Giant Oil Fields. The last "giant" discovery of oil was made in 1976 (Cantrell field in Mexico, the world's second largest oil producer, and that field has now reached peak production and has begun to decline at a fast rate). Formerly, "large" discoveries could be counted in the dozens per year. By 2002, the large-field discovery rate was down to three in that year. In 2003, there were no large-field discoveries. So, don't hold your breath waiting for giant oil fields to be discovered although the Bakeen Formation field of North Dakota and the Canoca field just discovered offshore Brazil will both be classified as "giant oil fields." The huge discovery made in the Gulf of Mexico in 2004 will also almost certainly be classified as a giant field by the time it is fully developed.
With all its publicity, many think ANWR (North Slope of Alaska) is a giant oil field. It is not! Those in the know in the oil patch call it a "baby pool." (Give the administration credit though. It was a clever political effort to have American citizens think the oil supply from ANWR was going to solve the Peak Oil problem for us.)
When total discoveries of oil are considered - not just giant discoveries - the world found 6.8 billion barrels in 2001-02 compared to 11.4 billion barrels per year a few years earlier.
If we are not finding adequate new deposits now, how will production keep up in the future?
Daniel Yergin Arguments Against Peak Oil. In the face of all the evidence to the contrary, some Bush administration spokesmen continue to paint a rosy picture about the future oil supply. Daniel Yergin, Chairman of Cambridge Energy Research Associates and Pulitzer Prize winner, has had several articles published incredibly claiming that his organization had thoroughly researched the matter and that their conclusion was that there would be an "unprecedented buildup of oil supply in the next few years."
Where is the increased supply to come from? Yergin should be ashamed of himself for his answer to that question. He cites Saudi Arabia for part of the increased supply. But, in the past few years, evidence has accumulated that Saudi Production has peaked and the Saudis may be lucky to maintain their present production for the next few years.
Yergin also cites Russia as a source of increased production. Russia does have large oil reserves but they have allegedly damaged their fields with poor production techniques and production is likely to decline over the next decade.
Then, he turns to Canada and the oil sands which contains a trillion or so barrels of low grade reserves. Increased oil production from present levels is expected but this oil comes at a heavy cost. Extracting it is energy-intensive and Canada must use their declining natural gas reserves to mine the sands. Also, extracting the oils creates an environmental desert with heavy acid rain vying with mountains of rubble for the distinction of which is worse.
Still, Yergin is right in listing oil sands as a good supply source and production from the sands is increasing rapidly.
But how long do you think Canada is going to allow their environment to be damaged so that U.S. citizens can enjoy their SUVs and giant pickups?
U.S. Oil Production is presently declining by about 2 % per year and Vice-President Cheney has predicted a 3 % per year decline in world oil production. The CEO of Slumberger estimated some time ago that an 8% decline per year in world oil production may be more realistic.
The recent discovery of a large Gulf of Mexico field and the accelerated development of the large but technically difficult Bakeen Formation of North Dakota will slow the drop in U.S. production some but not enough. Lets face it! We are running out of oil!
California contains one-fifth of America's remaining oil reserves (Why doesn't Governor Swartznegger quit squawking about fuel prices and get some drilling going - or maybe he doesn't believe in the free market system?)
Forbidden Offshore Drilling. Much of the U.S. remaining oil reserves are contained in the Federal offshore waters and drilling is forbidden there in some states. For example, Florida offshore may contain substantial deposits of oil and gas, but drilling in most areas is forbidden to protect the coast. In my own state of Louisiana, drilling is wide open and the devastated coastal wetlands showed it when Hurricane Katrina arrived. Louisiana is doing its share to ensure an adequate energy supply and is paying a heavy price.
Saudi Arabia, the world's largest oil producer, may have exaggerated the size of the country's huge reserves, according to some oil experts, and soon may be facing the exhaustion of some of its major producing fields.
Saudi Arabia denies they have exaggerated the size of the country's reserves. Their spin is that, in the 1980's after nationalization of the country's oil, the reserves were raised to more realistic figures. Prior to nationalization, the foreign firms that controlled the oil had grossly underestimated the Saudi reserves so they could keep oil prices up. Only about 30 wildcat wells have been drilled in Saudi Arabia in the past 10 years (compared to over 15,000 such wells in the U.S. The Saudis claim the oil is there and they will find it when it is needed. They say their oil reserves could be as high as 900 billion barrels. If so, that would put a different slant on the Peak Oil worries.........if their figures are correct!!
Who is telling the truth about the oil reserves? Everyone has an agenda to estimate either high or low reserves. Unfortunately, the periodic, "legally required" changes to reserve estimates always tend to lower the reserve figures.
China has substantial reserves of oil but not enough to supply her present rate of economic growth. She will increasingly compete with the U.S. for the available oil supply. Indeed, China is now competing with the U.S. for the Canadian oil sands oil.
(Note: China has huge deposits of coal but environmental problems will be severe if she has to increase coal consumption.)
India has only small deposits of oil and, like China, a healthy rate of economic growth ( not to mention, also like China, a billion plus population). India must import much of its fuel supply to survive. India is the nice guy on the block but I don't believe their citizens are willing to do without fuel while we continue to build our massive gas-guzzling SUVs and pickup trucks.
Iraq, our unofficial 51st state after the Iraq War of 2003, has enormous oil reserves that may rival those of Saudi Arabia, but, alas, oil production is actually decreasing due to the insurgency. Eventually, however, their oil reserves will be fully developed and the resulting supply available to the U.S. but that could be years (and many more American soldier lives) in the future. A better course of action for the U.S. than the present situation would probably be to pull out of Iraq and, at the same time, help them get their oil fields properly developed.
But try to sell that line of argument to the right wingers we now have running our government.
Iran, one of President Bush's "axis of evil" states, has very large reserves of oil and enormous deposits of Natural Gas. The Iranian natural gas will become an increasing factor in the energy mix as LNG terminals are built in the U.S. and the GTL processes ramp up. (See Natural Gas - The Clean Fuel.)
Venezuela has very large reserves of oil of varying quality and is a major supplier to the U.S. However, their president seems determined by his wild verbal attacks on President Bush to give the U.S. a reason to democratize them and seize the oil fields.
It should be noted that Venezuela, in addition to having large conventional crude oil reserves, has large deposits of tar sands (similar to but lower quality than the oil sands of Canada.) The U.S. could eventually provide the technology for development of the tar sands.
For more on Venezuela, see Next War & Future Wars.
Caspian Sea Oil Deposits are said to be very large but of varying quality. Efforts to get things rolling there have not been as successful as some experts first thought. However, at least some of our future supply will come from the Caspian Sea deposits.
African oil production continues to expand and much of the U.S. oil now comes from there. However, Africa is presently politically unstable! Can we depend on them?
There is good news from offshore Brazil where large new oil discoveries have been reported. One of the new offshore Brazilian fields, Carioca, may be a giant field if the 33 billion barrels attributed to it can be verified. (Some experts dispute the size of the discovery.) Just prior to the discovery of the Carioca field, a somewhat smaller (8 billion barrels) offshore field, Tupi, was found off of Brazil. There appears to be a great deal of oil off the Brazilian coast and the state-run Petrobras is doing a great job finding it! Oil from Brazil will no doubt be available to us.
A report of a 5 billion barrel high-quality oil strike offshore from Cuba is making the rounds. Even if true, this oil is unlikely to be available to the U.S. since our relations with Cuba are so poor. Their high-quality oil will probably end up in a communist or left-leaning country.
Hurricanes Katrina and Rita. In addition to almost destroying my home town of New Orleans, these two hurricanes temporarily virtually shut down oil and natural gas production in the offshore Gulf of Mexico from which a large percentage of our domestic oil supply and natural gas supply was obtained. The result: higher prices for the fuels, particularly the price of natural gas. Fortunately, the Gulf of Mexico production has largely recovered.
1. Oil & Energy Crisis. Peak Oil is on the way! An energy crisis is developing! Get ready to rumble!
2. Oil & Energy Company Stocks. Someone is going to make money out of the energy crisis! It might as well be you!
3. Large Oil Company Stocks.
The large companies appear to be underpriced as Peak Oil
approaches.
The oil age with its massive fuel consumption has just about ended! World oil production is approaching a peak as individual producing countries, one-by-one, reach peak production. From this point on, demand will exceed supply and shortages will develop.
Last Updated: 05/11/08
e-mail me @ vanc13@cox.net