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.
Willis
See the detailed quantitative graphs and tables by economist James Hamilton in:
Oil Prices, Exhaustible Resources, and Economic Growth. December 9, 2011 (65 pp)
http://dss.ucsd.edu/~jhamilto/handbook_climate.pdf
PS James Hamilton’s Historical Oil Shocks 2011 is at http://dss.ucsd.edu/~jhamilto/oil_history.pdf.
Don K says:
December 14, 2011 at 1:01 am
“A question one might ask themselves. If there is all that oil in the world, why are oil prices so high? Market manipulation is certainly one possibility. But I wouldn’t rule out the possibility that the world is producing about as much oil as it can and the reserve numbers are largely fiction. ”
Don,
Oil market prices are high, not because there is a paucity of oil, but because there is a paucity of oil refinery capacity. We simply can’t process all the crude pumped in a timely fashion.
So the root cause of scarcity and high prices is the lack of refinery capacity, not crude oil reserves.
There is a long rant about over regulation that follows my last statement – but that’s just beating a dead horse.
Andy
While there is a lot of oil remaining, the rate of extraction has been essentially flat since 2005. The world is using substantially more oil than is being found. According to industry experts and the IEA an oil crunch is coming in about 2015.
Peak oil should not be thought of as running out of oil. Rather it is running out of oil that can be profitably extracted. And that day is rapidly approaching.
Oil supply cannot keep up with demand. Even in our depressed economy oil is expensive. If the economy picks up to any appreciable degree the cost of oil will spike choking off a recovery.
For good information please go to The Oil Depletion Analysis Centre at: http://www.odac-info.org/welcome
See “westexas'” (Jeff Brown’s) Available Net Exports (after China & India)
Jeff Brown responded to Yergin’s There Will Be Oil
Somebody said “Worldwide, the chance of finding oil does not stop at the Carboniferous.”
I certainly hope not. The Woodford shale, which is the source of most of the oil and gas in West Texas and Oklahoma, is Devonian. Oil reservoirs can be any age as long as there is geologic structure that allows the oil to migrate from the source to the reservoir. A lot of West Texas and Oklahoma oil is sourced from the Devonian Woodford and produced from older Ordovician and Silurian reservoirs, as well as younger Carboniferous and Permian reservoirs.
Abiogenic oil makes CAGW look like well established science. It doesn’t just require making a lot of assumptions about things we don’t know, it requires ignoring everything we do know about stable isotope geochemistry, organic geochemistry of source rocks, thermal history of oil and gas, and actual distribution of carbon in the earth’s mantle.
A problem in discussing oil reserves is shared by the world of climate science: the statistics are dodgy. Historically they have been a mess; oil companies have interests at different times in under-reporting or over-reporting as stock price or tax issues weigh on them; sovereign states lie for various reasons; communist sovereign states always lie, and always have lied. The BP record Willis uses may be internally consistent, but it is still a construct built on half-truths, ignorance, wishful thinking and downright dishonesty. Very much like Climate Science, in fact.
Willis, generally your articles are quite good, but this one missed the mark, by a lot. Yes, oil will last 40 years, likely 100 years or more. But at what flow rate?
The two important measures of oil production is flow rate and ERoEI. Peak oil is, and has always been, about flow rates. The oil shock of the 1970s was caused by a mere 5% loss in production due to depletion starting in the US. It doesn’t take much of a drop in production for the demand to force prices higher, which then triggers a recession. Oil production world wide peaked in 2005 and has been on a plateau since. World oil production in 40 years will not be anywhere near what the world needs today, let alone in 40 years.
ERoEI is vital. It’s the laws of thermodynamics and cannot be sidestepped with technology. In 1960 ERoEI was 100:1. Today it is only 25:1. The Alberta Oil Sands is only 6:1 excluding downstream energy costs. Society needs at least 4:1. Once we have reached 1:1 the world has run out of oil energy, regardless of what’s in the ground.
Due to reduced demand, Gasoline and Diesel fuel are currently being exported from the U.S.
http://money.cnn.com/2011/12/05/news/economy/gasoline_export/index.htm
Garacka says:
December 14, 2011 at 5:21 am
The abiotic oil theory is quite intriguing. My memory is that it came out in the 1940′s from someone in or tied to the oil industry, and it has largely been scoffed at and research has not been institutionally pursued.
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Oil molecules have a close resemblance to animal lips. Abiotic oil was debunked long ago.
http://static.scribd.com/docs/j79lhbgbjbqrb.pdf
Yes, the abiogenic theory of oil is interesting. I do see some parallels to the climate change controversy. Perhaps this shouldn’t be surprising since it also goes against the “consensus” view.
Here are a couple more links to explore:
http://bit.ly/tmosA3
http://bit.ly/votK01
Bill Illis says:
December 14, 2011 at 4:32 am
The new process of “fracking” has just doubled all the numbers (particularly for natural gas) and extended the depths that fossil fuels can be recovered from. Everyone is now trying out this technique everywhere and it is making a big difference.
Contrary to a comment above, fracking has opened up the deep oil and gas shales which can come from before the Ordovician period. The Bakken oil shale in North Dakota, Montana and Saskatchewan is now putting up huge production numbers (and it is from the late Devonian 360 Mya).
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Bakken’s production is only 450,000 b/day. Though rising, it won’t last. Yes it is a huge deposit, but because of the geology total production from Bakken won’t surpass 1% of what’s in the ground there.
Les Francis says:
December 14, 2011 at 1:35 am
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…………………………………………..
Les, your opinion on Peak Oil, sounds like an Alarmist and CO2.
PaulC says:
December 14, 2011 at 12:41 am ………
Fredrick Lightfoot says:
December 14, 2011 at 2:53 am …..
Mike Borgelt says:
December 14, 2011 at 1:58 am …….
and don’t forget Lucy Skywalker….
Aboitic oil has not been debunked yet, or shouldn’t be.
http://www.usnews.com/opinion/blogs/energy-intelligence/2011/09/14/abiotic-oil-a-theory-worth-exploring
meemoe_uk says:
December 14, 2011 at 3:11 am
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.
——
Production from any given field increases to a maximum extraction rate. Once that is reached production does not fall off to zero the next day. It follows a bell curve. Peak oil is not the point of no more oil, it’s the point of that peak in production. This is where we are now. We have peaked in world wide production.
The reserve figure is used to determine barrel price and profit margin, not to determine actual reserves. R&D within each company needs money to find new and improved ways to use fossil based products and it can’t come out of stock dividends. So the reserve margin is used to justify an inflated price so that money is available for research without pissing off stock holders who remain spoiled on some kind of double digit return for their investment.
Garacka says:
December 14, 2011 at 5:21 am
The abiotic oil theory is quite intriguing. My memory is that it came out in the 1940′s from someone in or tied to the oil industry, and it has largely been scoffed at and research has not been institutionally pursued.
==========
Thomas Gold — an Austrian astrophysicist. http://en.wikipedia.org/wiki/Thomas_Gold A decade or so ago, I used to lurk on a forum inhabited by, among others, petroleum geologists. After the continental drift fiasco where Geologists rejected an important theory proposed by a non-geologist (Alfred Wegner) that turned out to be pretty much correct, geologists are a little more polite and humble than, say, climate scientists. But although they treat Gold’s theory politely, none of them believe that any of the oil/coal currently being produced is abiotic. Because of the high temps within the Earth, it seems likely that any “deep hydrocarbons” would be present as gas, not oil. And there is no evidence that I am aware of that any natural gas deposits currently known are abiotic.
Can tar sand and shale be added to a similar chart?
It’s a great summary piece, thank Willis for posting it.
ianl8888 says:
December 14, 2011 at 1:49 am
@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)
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This is true for a number of regions, like Saudi Arabia who over the past 20 years or production continue to claim they have the exact same reserves. Impossible of course. The teltail sign of production potential is current production rates and what fields are in tertiary recovery (like Ghawar is). Fact is the worlds largest fields are all in terminal decline in production. North Sea, Cantarell (peaked a 3.2mb/day now at 400,000 b/day), even off the east coast of Canada, which peaked quickly and is in terminal decline (currently half of what it produced at peak).
———–
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
—————
China surpased the US in auto production last year. 13 million cars in one year, and they have only dented the potential market. If anything China has the potential to outstrip the US in consumption within 10 to 15 years. The IEA estimates that the world will need some 120bb/day by 2020. They also state that we would need to find 7 Ghawars each year until then for that to happen.
————
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
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Not from me.
Now, at some point this party has to slow down, nothing goes on forever
True….
But the thing about expert projections are that they are always wrong…
And the 40 years left party could just keep on rocking until the end of time.
Robber says:
December 14, 2011 at 12:57 am
—-
You didn’t read the article, did you?
The point is that the 40 years of reserve number has held constant for at least the last 40 years.
It is incorrect to assume that just because, at this moment, there is an estimated 40 years of proven reserves, that we will run out of oil in 40 years.
All the oil that has been found but not proven is not included in that number.
All the oil that has not been found is also not included in that number.
PaulC says:
December 14, 2011 at 12:41 am
Good article.
2 points of comment.
Modern technology will always find more reserves than old technology.
Oil is not a “fossil” fuel. It is being “created” continually by reactions in the Earths’ interior.
Posts on this site have mentioned this a few times. Apparently the Russians are investigating this seriously.
There are no fossils associated with Oil.Oil comes from the bottom to the up. Old oil fields are reported as filling up after many years of being abandoned
Worth following up.
————-
Please point us to one oil field that has definite abiotic origin.
Every single oil field has been traced back to the biogenic source rocks.
If abiotic oil were true, there would be oil deposits in precambrian rocks. There are none.
Read the book Oil 101 for details of how oil is formed.
BTW, EVERY Russian oil field has a biogenic source.
In the highly unlikely event that we start running out of oil in forty years’ time, we then have another resource of such magnitude that it has rarely been touched except in close proximity to an iron ore deposit and a rail system. That resource is called coal. There are massive deposits that have been known of for many decades. There are no technical problems whatever. All that is necessary to make these deposits exploitable (or just the few that would be necessary) is demand, capital and railway lines. The end is not nigh and won’t be forty years hence.
David Gould says:
December 14, 2011 at 2:45 am
Willis,
And your graph shows production flatlining since around 2004,
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It could also be an indication that the world wide economy has been pretty much flat since 2004.
Production never exceeds demand. You are confusing a lack of growth in demand for a lack of growth in production.
Recent price increases in oil can have been caused by the collapse in the value of the dollar.
Is anyone bemoaning a shortage of coal?
—
Don’t give them any ideas.
PAUL SCHILIZZI says:
Don’t forget that
STONE AGE DID NOT END BECAUSE WE RAN OUT OF STONES
but, but, but, the bronze age…no not that one either, … the iron age … no …
/sarc
Good point!