Guest Post by Willis Eschenbach
In oil, as in other extractive industries, you have what is called the “R/P ratio”. In the R/P ratio, “R” is reserves of whatever it is you are extracting, and “P” is the production rate, the rate at which you are extracting and using up your reserves.
Figure 1. World annual oil production in billions of barrels (blue line), and years left at that production rate (R/P ratio, red line). Right scale shows the proven oil reserves for each year, in billions of barrels (dotted green line). DATA SOURCE: BP Statistical Review of World Energy 2011, a most fascinating Excel spreadsheet. PHOTO Spindletop Hill Gusher, 1901
When you divide the amount you have in reserves by the rate at which you are extracting the resource, you get the number of years the reserves will last at that rate of extraction. Accordingly, I include the R/P ratio in Figure 1 as “Years Left”
A couple of things to point out. First, the “Years Left”, the R/P ratio, is currently more than forty years … and has been for about a quarter century. Thirty years ago, we only had 30 years of proven oil reserves left. Estimates then said we would be running out of oil about now.
Twenty-five years ago, we had about forty years left. Ten years ago we had over forty years left. Now we have over forty-five years left. I’m sure you see the pattern here.
Second, this is only what are termed “proven reserves” (Wiki). It does not include “unproven reserves”, much of which is in the form of unconventional oils such as shale oil and oil sands. Even discounting the unproven reserves, while the rate of production has increased, the proven reserves have also increased at about the same rate. So the R/P ratio, the years left at the current rate of production, has stayed over forty years for almost a quarter century..
Now, at some point this party has to slow down, nothing goes on forever … but the data shows we certainly don’t need to hurry to replace oil with solar energy or rainbow energy or wind energy in the next few decades. We have plenty of time for the market to indicate the replacement.
Don’t get me wrong. I’d love to find a better energy source than oil. In fact, the huge new sources of shale gas will substitute in many areas for things like heating oil, and will burn cleaner in the bargain. And I do think we’ll find new sources of energy, humans are endlessly inventive.
I’m just registering my protest against the meme of “OMG we’re running out of oil we must change energy sources right now tomorrow!!”. It is simply not true. We have plenty of time. We have decades. We don’t have to blow billions of dollars of our money subsidizing solar and wind and biofuels. The world has enough oil to last for a long while, plenty long enough for the market to determine whatever the next energy source might be.
w.
NOTE: Oil figures, particularly reserves, are estimates. Oil companies are notoriously close-mouthed about their finds and the extent of their holdings. The advantage of the BP figures is that they are a single coherent time series. Other data gives somewhat different results. As far as I know the increase in proven reserves despite increasing production is common to all estimates.
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Thanks Willis that is the clearest and simplest exposition I’ve seen. Very helpful, bookmarked.
Now it would be good to consder, who benefits (fiscally) from promoting scare?
However I do agree with you and probably most other commentor here, that even so this is not necessarily an endless supply, that we should be actively seeking alternatives. And (IMHO) I think it is very important to consider “sustainability” – but with decent science behind it, as well as awareness of human reactions to crunch situations. And I think it’s important to search for how best to manage human reactions – starting with one’s own – in which, awareness of truth at many levels is of prime importance.
Paul C. Oil geologists know roughly where to look for the oil. It doesn’t appear at lower levels in the earths crust dated pre the Carboniferous Period. There are some deposits at levels dating to the age of the dinosaurs.
There is no sense exploring earths layers that are deeper than the Carboniferous period – there’s no oil to be found.
One point to make.
All the easy oil is gone. i.e. the oil reserves at low depths of the earths crust.which is relatively inexpensive to exploit. We are into the era of higher cost oil. – deeper land and deep offshore wells. Next will be more expensive shale oil.
Eventually as someone as already pointed out, oil will no longer be available for private transportation.
PaulC says: December 14, 2011 at 12:41 am
Indeed, there is some powerful evidence of this, plus powerful evidence of suppression of evidence (familiar anyone?). However, that evidence also says that such wells are not gushers and have to be pumped pretty slowly. The Russians are, I understand, already doing this using several super-deep wells.
But tread carefully here, be extra careful with facts and politeness. This topic is a bit sensitive at WUWT, or has been in the past. Fringe topics are always sensitive issues liable to be bagged by the William Connolleys or whatever, or leaned upon by interested parties.
@Willis E
This touches on one of my professional interests
It is true that both private and Govt organisations (eg. OPEC, Russia) routinely restrict (censor) hard data on oil Resources and Reserves (gold and other minerals as well). This is done for “national security” reasons. It is almost impossible to access accurate, reliable geological/engineering data on these … hence your 40 year “magic pudding” (R)
The future rate of extraction (P) depends on the future rate of consumption. We would need to predict with accuracy the future consumption of China and India over the next 50 years to be in the hunt for a reliable estimate of P. Not much hope of accuracy here, I believe
Whenever Peak Oil advocates rear their wishful thinking (Peak Oil is almost always used to scare people), I list out these two factual questions and inquire whether they have reliable answers. Then the only reply is dead silence
It also does not include resources that are not yet legal to extract. When these are legally extractable they become a reserve. Most of Alaska falls into this and Alaska has large coal fields, oil and gas which the rules prohibit us from extracting. There are also clathrate deposits in all oceans and under the permafrosts of the planet. All we need is the political will to do this, and a bit more technology perhaps.
What the graph shows beautifully is the cyclical nature of the oil business which is common to many extraction industries.
When supply is short prices are high and profits good leading to investment which in turn results in a glut and falling prices and profits and a dearth in investment.
This is clearly seen; the high prices of the 70’s spurred development so by the late 80’s oil was cheap, development slowed up, until the steadily rising price towards the turn of the century sparked a new round of exploration.
Only political meddling is buttressing the oil price at the moment, expect to see it fall quite sharply over this decade.
Kindest Regards.
The trend line is clear: the R/P ratio increases at 0.5% per year.
Correction: the R/P ratio increases at 0.5 years per year. Or, if it’s exponential, 1% per year.
>:)
Oh good, Les Francis. Now please tell us why there are heaps of hydrocarbons on Titan.
My understanding as some one has already posted above is that OPEC countries are notorious for overstating their reserves.
The biggest question to ask about the chart is if oil reserves are not a problem, how come they have not responded to significant increases in consumption from China.
Those increases from china which have not been matched by worldwide oil production have been largely responsible for the ever increasing price of oil (disregarding the 2008 spike)
There is only one line on that graph of any worth when considering peak oil and its the blue line. Its the only one which has any sort of reliability of measurement too.
Proven reserves being “large” supports those like Willis who think peak oil is so far off its not a problem.
Proven reserves being “small or unknown” supports those who believe the oil companies are rigging the figures to set their production quotas within OPEC rules.
The blue line, however, is globally visible production and reflects actual reality and if it never gets higher than it is, means we’re already peaking.
Willis,
Peak oil has never been about peak oil reserves. It has been about peak oil [i]production[/i]. And your graph shows production flatlining since around 2004, which is an indication that peak oil might be upon us.
Sigh, Wooden derricks and 100,000 barrels a day at 1,000 feet, the good old days, But !
For political, geographical, and access problems there is still about 40% of the world land mass that has not been explored/seismic surveyed, Note LAND MASS. 75% of the worlds oceans remain unexplored, and as for the graph above, the owner of the biggest reserves of oil in the world would most probably be the U.S. Military and that is just areas marked on maps not barrels Sigh.
Lucy Skywalker says:
December 14, 2011 at 1:47 am
Indeed, there is some powerful evidence of this, plus powerful evidence of suppression of evidence (familiar anyone?). However, that evidence also says that such wells are not gushers and have to be pumped pretty slowly. The Russians are, I understand, already doing this using several super-deep wells.
But tread carefully here, be extra careful with facts and politeness. This topic is a bit sensitive at WUWT, or has been in the past. Fringe topics are always sensitive issues liable to be bagged by the William Connolleys or whatever, or leaned upon by interested parties.
I am really surprised that topics like this are taboo on WUWT. Oil supplies are close to the most important issue facing this planet.
It sounds like Global Warming all over again
Not to worry. The good news is if we ever run out of the stuff in the ground, the folks at Los Alamos have shown that we can simply use nuke power to manufacture hydrocarbons literally out of the thin air and water. Carbon from CO2 (think dry ice); hydrogen from water. Ever since Germany of WWII vintage except they had to use coal.
Nuke material we know about would be good for a billion years or so. And the Greens would just love recycling CO2 and taking dirty water and making clouds out of it. Even my tomatoes would love it.
Energy by power source 2008[18] TWh
Oil 48 204 33.5%
Coal 38 497 26.8%
Gas 30 134 20.9%
Nuclear 8 283 5.8%
Hydro 3 208 2.2%
Other RE* 15 284 10.6%
Others 241 0.2%
Total 143 851 100%
Source: IEA *`=solar, wind, geothermal and biofuels
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Definition of ‘Barrel Of Oil Equivalent (BOE)’
A term used to summarize the amount of energy that is equivalent to the amount of energy found in a barrel of crude oil. There are 42 gallons (approximately 159 liters) in one barrel of oil, which will contain approximately 5.8 million British Thermal Units (MBtus) or 1,700 kilowatt hours (kWh).
—————————————————————————————————————————
2010 use 30 billions barrels increasing from 23 billion barrels 2000 estimated 2060 production being 30 billion x 31.42% compounded x 5 = 117 billion barrels or 201 423 TWh
—————————————————————————————————————————
In 2008, total worldwide energy consumption was 474 exajoules (474×1018 J=132,000 TWh). This is equivalent to an average energy consumption rate of 15 terawatts (1.504×1013 W).[1] The potential for renewable energy is: solar energy 1600 EJ (444,000 TWh), wind power 600 EJ (167,000 TWh), geothermal energy 500 EJ (139,000 TWh), biomass 250 EJ (70,000 TWh), hydropower 50 EJ (14,000 TWh) and ocean energy 1 EJ (280 TWh).[6]
http://en.wikipedia.org/wiki/World_energy_consumption
————————————————————————————————————————–
If renewables are producing 25% of what they are capable of by 2060 then no wucking furries.
Ecxcellent post again Willis, clear, logical, rational! I like:-)
PaulC says:
December 14, 2011 at 12:41 am
I also understand this to be the case. Indeed when you Wiki search for oil it merely states more or less that it is generally accepted to be a fossil fule, but provides no evidence to support such an assumption/statement. The Russians, under Jo Stalin, started to reseach the origins of oil to permit them to make newer discoveries of supplies. They believed that oil was in fact mineral based as it contained many minerals found in meteorites. I’ll try & track down the sources of this information as I only came across it by accident, & didn’t download it at the time. If it is the case, it has huge implications for supplies in the future!
As you infer in the article – no commodity has ever run out. Alternatives or substitutes always take over. That is why the “running out of oil” theory is an alarm sent to scare climate realists.
thanks Willis, this underpins the key idea from which peakoil doomers keep themselves in suspended hysteria. Oil companys only ever bother prooving about 20-30 years worth of future oil reserves. The peakoil gang misinterpret this as ‘ only 20-30 years worth of oil left ! ‘ , which combined with their bell curve mean that ‘peak oil is now ! ‘ – always.
I was a peakoi doomer for a couple of years 2006 – 2008. I noticed the day of reckoning keep slipping forward, which spurred a critical review of my belief.
And of course, herein lies much of the problem…everytime the R/P slope is down, the peak-oil people start crowing about how we are running out of oil. This sends entrepreneurial people out, spending money and devoting their careers to find the replacement, and paying others to devote their careers to finding the replacement, only to have the line moved farther and farther into the future. How on earth do they A. justify their careers, and B. get their money back? Hmmmmm…
When does the world produce its last barrel of naturally occurring, free-flowing oil? In about 2160. What happens in the meantime? The production rate goes down to meet that zero flow rate in one hundred and fifty years. What will the decline rate be over the next few decades? It will average about one million barrels/day/year. What will happen to the oil price? It will go up until substitutes come in.
Willis
You have it wrong about what ‘proven’ reserves are. It is a term that defines a statistical view of the reserves which have a band of uncertainty with them. For example if there is a probability distribution curve defining the range of outcomes the ‘proven reserves’ would be say the P85 number (85th percentile). The expectation number (mean) is often quoted as ‘probable’ while the P15 number is sometimes quoted as ‘possible’
Also, its not a case of proven vs. unproven. You also have to understand the various definition of the resources. In order for something to classify as ‘reserves’ it has to be developed iof have a solid development plan in place. Sometimes (for larger volumes) it is even required to have the funding agreed and committed. If this is not done then the resources are not called ‘reserves’ but other names like ‘resources’ of ‘scope for recovery’ etc. You also start to get into the discussion about discovered vs. undiscovered etc.
Oil is being continually created, but at rates much slower than we are using it. It makes sense to consider it a finite resource. The Russian and Swedish deep drilling was done 25-30 years ago and found nothing. IIRC the Swedish well found traces of oil but it was never established to be anything but contamination from the drilling process itself.
“Proven Reserves” is not a geologial or engineering number, it is a financial number calculated by very specific SEC rules. It counts only oil proven by existing wells and assumes current prices and technology. It is obviously a very conservative estimate. It is useful because all companies publicly traded in the US have to calculate it the same way, so comparing Exxon’s reserves to Chevron’s reserves is at least an apples to apples comparison, even if it is a lowball estimate. It is of no value in estimating long-term future production.
Although restricted Alaskan coal fields were mentioned by John Marshall, the production of petrol/gasolene (or other liquid fuels) from coal is barely in the picture as yet – crude oil is still cheap enough not to need it.
Good line Brian