The world's remaining oil reserves and whether the supplies are adequate are discussed. Peak Oil is anticipated to occur in the next few years and a serious oil shortage could develop. Until recently, oil prices moved up rapidly and that rise is likely to resume when the present severe recession is over.
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 oil experts," this was consider another "chicken little" prediction 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.
Presently, the continental U.S. has about 30 billion barrels of proven conventional 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 following the path of oil prices!
Thanksgiving Day, 2005 has now long passed and it does not appear that Peak Oil occurred on Thanksgiving, 2005. And, indeed, with several of the past few winters being close to record warmth, the arrival of Peak Oil has been delayed. (Also, count the success of mining Canadian oil sands, improvements in Soviet Union oil technology, recovering Iraq oil production, and development of shale formation Bakken oil for part of the delay. Much of the delay of Peak Oil has also been caused by the deep recession we are now experiencing.)
But Peak Oil is inching closer so be ready! Recent advances in alternative fuel technology for LNG, GTL, oil sands, solar energy, wind energy, and the new giant fields discovered recently in the Gulf of Mexico and off Brazil's coast, 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, >and Hybrid Car for more information.
Hubbert's Law states that oil production from a field peaks when one-half of the oil has been removed. When applied to world production in general, the meaning becomes ominous: when about one-half the oil on earth has been produced, total production will begin to fall. This will produce serious economic complications which will greatly impact mankind in general.
One source predicted a severe oil supply-demand gap with blackouts becoming common by 2008. Of course, 2008 has now passed and, although the oil price temporarily shot through the ceiling at over $145 per barrel, no severe blackouts occurred. It is now April 2009 and oil prices have dropped back to about $50 per barrel. The deepening recession had a lot to do with the oil price drop and we should be prepared for a substantial rebound in price when the recession ends.
This web page reviews the few options the U.S. and the world have for coping with the likely eventual shortage of oil.
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 strikes in the Gulf of Mexico, Bakken, and offshore Brazil were impressive). Worldwide, the discovery rate peaked in 1964 and world oil production is expected to peak in the next few years.
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.
The last verified "giant" discovery of conventional 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 are candidates to be classified as "giant oil fields" if the reports of oil reserves in the fields are verified. 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 likely 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?
Although the discovery of giant conventional fields of oil has become rare, development of new technology has opened up the dense shale formations for development and discoveries of giant oil reservoirs in the shale formations are likely to occur at an increasing rate. The recovery of natural gas from shale formations has virtually revolutionized the natural gas industry and no experts speak of a natural gas shortage any longer. In regard to oil, the Bakken shale formation is now under rapid development and the oil produced is of excellent quality. The Bakken formation is estimated to hold anywhere from 4 billion to 500 billion barrels of oil (price of oil is an important determinate here.).
Sure, the Bakken formation is big but are oil-containing dense shale formations as plentiful as the gas-containing formations of which at least 22 have been found in the U.S. so far. Investigation of the shale formations is only a few years old so we will know more later.
Amazing! Five years ago, the oil companies dodged the shale formations. Now they eagerly seek them out! I'm sure shale formations are being sought in other countries, also.
U.S. Oil Production is presently declining by about 2 % per year and former 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 shale Formation of North Dakota will slow the drop in U.S. production some but we have to face the possibility of an oil shortage in the future.
California contains one-fifth of America's remaining conventional 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 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.
Iran, one of former 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 natural gas-poor countries and the GTL processes ramp up. (See Natural Gas - The Abundant Fuel.)
Venezuela has very large reserves of oil of varying quality and is a major supplier to the U.S.
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 shut down much of the 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, 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!
The oil age with its massive consumption of cheap oil 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, oil demand will exceed supply and shortages may develop.
Last Updated: 03/10/10
e-mail me @ vanc13@cox.net