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.
Nay, indeed, it’s not nigh. So you can neigh (horse-laugh) at the neos.
jrwakefield says:
December 14, 2011 at 6:31 am
If abiotic oil were true, there would be oil deposits in precambrian rocks. There are none.
===================
Let me make it clear that I am not a believer in “deep oil”. I think there is a small chance that there is a very little abiotic oil and, perhaps slightly more likely, a small amount of abiotic gas. I’d be really surprised if either amounts to much economically.
That said, algae have been around a long time and there are hydrocarbon traces in some precambrian rocks — e.g. in Australia’s MacArthur basin. So far as I know, the (biotic)
oil in rocks up to 1.7 Billion years old is not present in commercially exploitable quantities and is of interest only to a few scientists. But it is present. I believe the reason there is not more of it is that there are very few preCambrian rocks around that have not been bent, folded, spindled, cooked and extensively mutilated.
To all the abiotic oil deniers: I assume you await with bated breath the first geologic explorations of Titan, to unearth (untitan?) the fossils of the alien ferns and multi-colored algae etc. that decomposed into its lakes of hydrocarbons!
Until then, ….
Production and sale of oil, like natural diamonds, is rationed by those who own the resource in order to fetch the highest profit the market will bear. Same as with anything else.
I remember when I was a kid in the 70s that oil was going to run out before the year 2000 so we must do something to switch to alternate energy supplies before then.
The odd thing about ‘Peak Oil’ is that so many of the ‘Peak Oil’-ers I’ve met are also firm believers in AGW, which makes no sense if oil is about to run out. I can only presume they’ve never met a scare story they don’t like.
Nice post Willis. As usual, there is some good info in the comments, as well as some people who are compelled to post on something about which they have little knowledge.
Oil is biotic in origin. Anyone who looks at enough geochemical data will agree, even the current Russians. Oil does occur below the Carboniferous. Most of my oil income is from the Ordovician.
The parallels to peak oil and climate change are not in that consensus is wrong on origin, they are in the fact that peak oil is built upon faulty mathematics. The esteemed Hubbert’s curve is now off by 10 fold for US gas, and well on the way to similar error bars in oil.
Christopher Hanley says:
December 14, 2011 at 12:59 am
Forgive me for sounding a melancholy note. Forty years is not a long time.
In forty years – 2050 – world oil supplies will be projected to last 40 years – until 2090.
Why? Because once reserves reach a certain size it doesn’t pay to do any more exploration. What possible use is it to an oil company to have a million years of reserves? It only hurts the market price of oil.
As reserves drop, the price of oil goes up, and exploration expands increasing reserves.
Slightly off topic but the UK Daily Mail Newspaper is currently running a poll on “Should be build more wind turbines to cut carbon emissions?”
To vote go to:
http://www.dailymail.co.uk/debate/polls/poll.html?pollId=1029654
The wind industry seems to have been able to load the voting so let’s redress the balance.
Q. Is anyone bemoaning a shortage of coal?
–
A. Don’t give them any ideas.
You mean like this?
The Coal Question: An Enquiry Concerning The Progress Of The Nation And The Probable Exhaustion Of Our Coal-Mines
While we all understand the need for alternative sources for transportation, let’s understand that the products that come from a barrel of oil stay standard. Specifically, a barrel of oil usually yields 44-45% gasoline products. There isn’t much to do with this ‘product’ other than use it for transportation. Don’t forget….when Titusville, PA hit, they were refining the oil for lamp oil. The ‘gasoline’ BY-product was dumped into the rivers and streams because there was not a use for it until the automobile was developed. So where there is oil there will always be transportation fuel.
I would be very curious to know that if the full continents of South America, Africa & Asia (including offshore) were really explored, how much more oil/gas/shale resources would they find to add to the ‘proven reserves’? I’m sure there are a whole bunch of places they have not looked.
Also, would oil/gas be available in the mid-ocean (off the continental shelf regions) as well?
Jeff
@Willis
“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.”
Typically naive. I have cars and motorcycles older than the number of years of petroleum left to power them. Life is short. Several decades goes by quickly. It’s not like we’re talking 400 years we’re talking 40 years.
You don’t seem to have any appreciation for how large the infrastructure is for things powered by gasoline, diesel, and avgas. That infrastructure took decades to build and deploy. It will take as long to replace it with something else. We’re talking trillions upon trillions of dollars in infrastructure.
Consider the end-to-end supply chain for avgas and the air cargo/passenger transportation fleet. Not only is the money bound up in that alone huge and growing there is nothing that can replace it. There are no alternatives. Imagine civilization without air transport. Imagine a million useless airports and 100 million employees in the air transport industry without jobs and all the ancillary jobs like at Boeing and their contractors without jobs.
Nor do you have any appreciation for what happens to the price of commodities that are nearing exhaustion. Do you think gasoline is going to top out at USD $5/gal until the last drop? The globe is mired in the worst recession in 75 years and there’s not a doubt in my mind that the root cause was oil price which in 1998 began rising from $20/bbl to eventually well over $100/bbl where it remains today. Just about every recession since WWII was preceded by a dramatic rise in oil price. I’m not sure how many decades it will take to adjust to $100/bbl oil but it isn’t looking good after the first ten years of prices over $30/bbl. And there’s no end in sight. No light at the end of the tunnel. That light you see in the distance is another train rushing headlong at us.
Nor do you seem to appreciate the fact that demand is growing and consumption is increasing so that 40-year supply is only 40-years at current rate of consumption.
Nor do you seem to appreciate that we had an oil shock some 30 odd years ago. That was a wakeup call. How much have we got done in those 30 years towards a vital, reliable alternative energy supply and infracstructure for it? I’ll give you three chances to say there’s been no significant progress. We’re even more dependent today on oil than we were in 1979 and worse we’re dependent on foreign oil bought from countries that hate western democracy. Isn’t that a fine mess?
So basically, Willis, you are a classic example of fiddling while Rome burns.
[[[ MarkW says:
December 14, 2011 at 6:43 am
Recent price increases in oil can have been caused by the collapse in the value of the dollar.]]]
The Dollar is still strong in my neighborhood…
I can still buy a hamburger for 99 cents, it’s been that way for years and years.
The price of oil is manipulated.
A Chevron Exec. said so.
Willis,
A very interesting question to ask the oil majors (BP for example) is “the concept of ‘Reserves’ is an economic concept, meaning that portion of ‘Resources’ that can be economically extracted at a particular oil price. What oil price has been used to calculate the Reserves that you publish.”
For some reason, the oil companies are very reluctant to disclose that number. Some years ago, when I asked BP at their annual public presentation on oil reserves, they declined to answer. A retired oil industry executive was able to tell me that he knew that they had used a price of US25 per bbl, when the actual price was trading in the US$70 range.
Of course, if you use a price of, say, US$100 to calculate economic reserves, many of the alternative sources such as tar sands, oil shale, coal to oil conversion etc become economic, thus dramatically increasing available ‘Reserves’.
On another point, it has seemed to me that all the US has to do to ensure domestic oil supply security is to offer a guaranteed price of, say, $75 per bbl, for a period of, say, 20 years, to emerging projects. Companies other than the oil majors can find it difficult to source funding to develop projects involving alternative sources due to capital intensive nature of such projects, and bad experiences in the past when such projects coming on stream caused an oversupply resulting in prices as low as US$10 per bbl, Low prices resulted in financial carnage. This can easily be sidestepped by providing a guaranteed price for 20 years. I would have thought that such an approach would be sensible and politically acceptable. The mechanisms can be worked out.
MarkW says:
December 14, 2011 at 6:43 am
“Recent price increases in oil can have been caused by the collapse in the value of the dollar.”
This is true to only a small degree. Oil was $20/bbl in 1998. Ten years later it topped $100/bbl and still flirts with that price point today. The value of the dollar didn’t collapse to $0.20 in those ten years. Not even close. Try again.
jrwakefield says:
December 14, 2011 at 6:31 am
If abiotic oil were true, there would be oil deposits in precambrian rocks. There are none.
This doesn’t prove oil is abiotic or biotic, only that solid rock does not hold oil or gas.
Oil and gas move upwards through rocks until they reach the surface, unless trapped by a structure underground. This happens because oil and gas are less dense than both rock and water. To accumulate, oil and gas need a porous structure with a impermeable cap. Sedimentary rocks provide this structure. Precambrian rocks do not, because they are solid rock. Thus, oil and gas are not found in precambrian rocks, because it is physically impossible.
So for example, Alberta has oil because it was at one time an ocean, and the sediments that were laid down formed reservoirs to trap the oil and gas released from deeper within the earth. The source of that oil and gas is open to question. It is hydrocarbon. Most of the carbon on earth is trapped in rocks at the bottom of the ocean. These rocks along with water are carried deep within the earth by subduction, where they are cooked under heat and pressure. It is possible that the carbon in the rocks and hydrogen in the water combine to form hydrocarbons. while the oxygen in water combines with the rocks to form oxides.
Most people assume that most of the water on earth is held by the oceans – sort of like giant swimming pools. This is not true. The oceans are simply where the water table in the earth’s crust and mantle is higher than the level of the land. We don’t know how much water is actually held by the earth and how deep it extends within the earth. The deeper you go within the earth, the higher the pressure, the higher the boiling point of water. Can super heated, super pressurized water combine with carbon bearing rocks to form hydrocarbons and oxides?
Just to add fuel to the fire(hehe) on abiogenic oil, here`s Vladimir G. Kutcherov paper
Abstract
There is widespread evidence that petroleum originates from biological processes1, 2, 3. Whether hydrocarbons can also be produced from abiogenic precursor molecules under the high-pressure, high-temperature conditions characteristic of the upper mantle remains an open question. It has been proposed that hydrocarbons generated in the upper mantle could be transported through deep faults to shallower regions in the Earth’s crust, and contribute to petroleum reserves4, 5. Here we use in situ Raman spectroscopy in laser-heated diamond anvil cells to monitor the chemical reactivity of methane and ethane under upper-mantle conditions. We show that when methane is exposed to pressures higher than 2 GPa, and to temperatures in the range of 1,000–1,500 K, it partially reacts to form saturated hydrocarbons containing 2–4 carbons (ethane, propane and butane) and molecular hydrogen and graphite. Conversely, exposure of ethane to similar conditions results in the production of methane, suggesting that the synthesis of saturated hydrocarbons is reversible. Our results support the suggestion that hydrocarbons heavier than methane can be produced by abiogenic processes in the upper mantle.
Full paper to be found at the bottom on link
http://peakoil.com/forums/nature-geoscience-study-abiogenic-oil-and-gas-forever-t55857-30.html#p958045
As Willis alluded to –
‘Peak Anything’ is a matter of economics.
We used to generate our electricity, heat most of our homes and drive around in 6 MPG cars all using oil.
We don’t generate much electricity from oil anymore, most homes are heated with natural gas and only the rich can afford to drive a car that only gets 6 MPG.
US Oil consumption today is pretty close to what it was in the late 1970’s, considering we have 80 million more people I would say demand is ‘flat’
http://www.eia.gov/pub/oil_gas/petroleum/analysis_publications/oil_market_basics/dem_image_us_cons_sector.htm
Dave Springer says:
December 14, 2011 at 7:38 am
“You don’t seem to have any appreciation for how large the infrastructure is for things powered by gasoline, diesel, and avgas. That infrastructure took decades to build and deploy. It will take as long to replace it with something else. We’re talking trillions upon trillions of dollars in infrastructure. ”
You mention “Diesel, gasoline and avgas”. You should have included CNG and LPG. Refitting a gasoline car to LPG costs 2500 EUR. A bit more for refitting CNG. Germany has 6000+ gas stations that also offer LPG, and 900+ that also offer CNG.
What was the problem, again?
Mike Borgelt says:
December 14, 2011 at 1:58 am
“Oh good, Les Francis. Now please tell us why there are heaps of hydrocarbons on Titan.”
For the same reason there is a huge fusing ball of hydrogen at the center of the solar system. It’s primordial. For better or worse the inner planets and moons got stripped of most of their free light elements by the heat of the sun and strength of the solar wind and, as a consequence, they are rocky/metallic things.
Did you really not know that?
The text is very addequate. Anyway, I think you should say that the scale for the World Oil Production is nor the left or the right one… or better, please give the scale for the production. Otherwise, the plot is misleading.
Re: Dave Springer on December 14, 2011 at 7:38 am:
Okay, Springer has unloaded the ‘Willis, you’re so ignorant and stupid, you don’t know how ignorant and stupid you are’ rant that I was expecting and waiting for, this time without the added ‘drug-addled war-dodging hippie’ flavorings. Since it’s highly unlikely anything will be said in the comments that will warrant the altering of Willis’ basic yet reasoned post, guess I can stop reading now.
😉
Production issues. In western Canada, home of the oil sands, that is oil sands not tar sands.
Supply means nothing if there is no production
http://www.cbc.ca/news/canada/edmonton/story/2011/11/19/alberta-diesel-shortage.html?cmp=rss
http://www.canada.com/reginaleaderpost/news/story.html?id=d2c4b7dc-e369-4867-97bb-dd2eef857f07
malagaview says:
December 14, 2011 at 6:28 am
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.
——
Not one oil field can be shown to be of abiotic. EVERY oil field has a biological source rock.
JKrob says:
December 14, 2011 at 7:37 am
I would be very curious to know that if the full continents of South America, Africa & Asia (including offshore) were really explored, how much more oil/gas/shale resources would they find to add to the ‘proven reserves’? I’m sure there are a whole bunch of places they have not looked.
Also, would oil/gas be available in the mid-ocean (off the continental shelf regions) as well?
Jeff
———-
Except for the Arctic, the entire planet has been searched. The big easy fields have all be found and exploited.
There wont be oil beyond the continental shelfs, wrong geology. Oil deposits are mostly from shallow marine ecosystems. Explained in the book Oil 101.