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.
I’m just getting caught up with the comments here, so please forgive if this has already been answered.
The USA has been exporting refined gasoline and diesel for years. Venezuela, for example, does not have the ability to refine the oil they produce. Venezuela has never had the ability to refine their heavy crude. They have always exported crude oil and import refined gas and diesel.
We have also been exporting diesel to Europe for years. For some reason, Europe does not have enough refineries to meet its needs. (Any guesses why? Any possible suspects come to mind?)
Brian H says:
December 14, 2011 at 7:11 am
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!
Brian,
Since NASA says:”Titan’s thick cloudy atmosphere is mostly nitrogen, like Earth’s, but contains much higher percentages of “smog-like” chemicals such as methane and ethane. The smog may be so thick that it actually rains “gasoline-like” liquids”, and we’ve been told (quite dogmatically) “There is no oil on Titan”, perhaps rather than looking for fossils, we should just look for the refineries that have refined all the oil (since there is none there now) into lighter hydrocarbons. They should be much easier to find than those tiny fossils too.
“Twenty years from now the gasoline motor car will be gasolineless, the motor-boat a memory and the airplane a museum curio. Industry dependent upon the derivatives of petroleum will have to look to other sources for fuel and lubrication. All this is true-if the prediction just made by the United States Geological Survey is accurate”. From “The Iron Age” April 6, 1922 page 949
MarkW says:
December 14, 2011 at 11:17 am
Except for the Arctic, the entire planet has been searched. The big easy fields have all be found and exploited.
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That explains why they keep finding new, big fields.
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Which ones? Be specific. Make sure you include how much oil is in place and compare that to our rate of consumption.
jrwakefield says:
December 14, 2011 at 11:15 am
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What alternative is there that has the same energy density, in liquid form, as oil? We keep hearing about this mythical alternative, but we never see anything close to oil. It’s going to take decades to switch over, we need to start now if some alternative exists.
_________________
Well, it’s not liquid and it has a much higher density than oil, but : Uranium?
Something to consider, with all the talk of peak oil and 40 years not being enough time to transition to another technology… how long did it take to transition from gas to electrical lighting?
The first practical lighting system was invented in the 1870s or thereabouts (system meaning not merely the incandescent light itself, but also the means to power it in a setting other than a laboratory). Gas lights were almost completely replaced within 40 years.
40 years isn’t such a short time for a new technology to become ubiquitous.
It’s going to take decades to switch over, we need to start now if some alternative exists.
1) No alternative exits.
2) We aren’t running out for several hundred years, so why worry?
For those of you who think the ecomomy will solve any oil shortages by increasing price of oil.
The effects high oil prices has on food.
http://www.energybulletin.net/stories/2011-12-14/soaring-oil-and-food-prices-threaten-affordable-food-supply
Whether the deep water Gulf of Mexico is underlain by continental or oceanic crust really doesn’t matter. Maybe it’s basalt, maybe it’s highly stretched out continental material. The sedimentary rocks that form the reservoirs, like the Eocene/Paleocene sandstones, are of continental origin in any case.
The water depth record for production is currently held by the Shell/Chevron/BP Perdido platform, located in 8000 feet of water in the Gulf of Mexico. Some of the individual wells feeding into the Perdido platform are in over 9000 feet of water.
http://www.offshoreenergytoday.com/usa-shells-tobago-offshore-field-breaks-depth-record-for-subsea-production/
JRWakefield, I can assure you the UKERC report you have referenced is one of the most amateurish efforts (of several hundred) ever reconciled by Trendlines Research over the past seven years. It is a political document that ignored completely the findings of its technical consultant (C Skrebowski). One must remember when reading reports by this fraternity that McPeaksters have declared imminent peak oil virtually every year since 1989. They are a mere cult and are engaged in gross misinformation on this topic.
If instead one views the consensus avg of the 16 tier-1 geologists involved in annual oil depletion projections, it is revealed All Liquids is targeted to occur in 2024 @ur momisugly 97 Mbd. The sub-category of light sweet crude (regular conventional oil) peaked @ur momisugly 69 Mbd in 2005 and is presently 64 Mbd of 88 Mbd total flow.
monthly peak oil charts: http://trendlines.ca/free/peakoil
mondo says:
“December 14, 2011 at 7:38 am
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”
I like to tease the Peak Oil mob with the simple question as to why there was only 25 years of reserves in 1945; by 1970, that oil was gone, but we had 30 years of reserves; by 2000, all the 1970’s oil had gone but we had 40 years of reserves. How come? They keep telling me we are about to hit a peak – they clearly don’t even understand the question.
The answer, of course, is that in 1945 we were talking oil at $2/bbl; by 1970 there was no more $2/bbl oil but lots of $10/bbl; by 2000 there was no more $10/bbl oil but lots of $25 oil. Yes, ‘reserves’ are indeed an economic concept. But will the Peak Oil gloomsters understand that simple economics? I haven’t yet found one.
Resource econ is one area where econ illiteracy is rampant and policymakers are now happy to get it wrong with emphasis applied—see Markey and Waxman. The continuing pattern of extending the years of remaining reserves for decade after decade stems from industry and investment adaptation to price signals with lag times appropriate for that sector. In most cases the lag time to install new capacity or apply new production or discovery technology takes longer than the armchair experts and biased policy distortionists have time for. They look more like short-termers in the stock markets than the industry players and principled investors themselves. I guess the policy distorters are cyclical just like the resource industries, but with countercyclical timing and motives.
jrwakefield says:
December 14, 2011 at 11:15 am
“What alternative is there that has the same energy density, in liquid form, as oil? We keep hearing about this mythical alternative, but we never see anything close to oil. It’s going to take decades to switch over, we need to start now if some alternative exists.”
Man you really are a doom and gloomer. Right now with current technology, automobiles and light duty trucks, ie pickups , the type of vehicles that joe public drives everyday which account for the vast majority of the vehicle miles driven everyday and the oil consumption in the good old USA, can be converted to run on either LNG or gasoline. The reason the majority of drivers are still driving on gasoline is the availability of refilling stations for LNG is limited, however as more vehicles are equipped with this capability, the gas stations owners will see a potential market and will install the necessary equipment to provide the LNG.
It doesn’t have the same punch per pouind that gasoilne has, but it is transportable and readily adapts to current transportation technology. As for depletion of this resource? virtually limitless and currently there are known supplies of 100’s of years.
Relax, take a chill pill and enjoy your day.
Cheers!
Jeff says: “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…”
That’s why oil shale is the wave of the future, and always will be.
Isn’t that the year the EPA was founded? It isn’t a coincidence.
More Soylent Green! says:
December 14, 2011 at 11:32 am
David Gould says:
December 14, 2011 at 2:45 am
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.
And so what? Does it show anything more than production dropped when demand dropped? We are in the middle of a global economic meltdown. What are conditions like on your planet?
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Demand is down because of demand destruction caused by high oil prices.
>>tokyoboy says: December 13, 2011 at 11:56 pm
>>Where on earth is the good ole Peak Oil??
You misunderstand what Peak Oil is.
Peak Oil has nothing to do with reserves, it is all about production rates. The Mid East might have humungous reserves, but oil production has been reducing there because it is harder and harder to get their thick oil out of the ground.
Peak Oil occurs when pruduction no longer meets demand – and the data here does not give us that information. We need a graph of world consumption vs world production, and that will give us a clearer idea if there is going to be an oil shortage (Peak Oil) in the near future.
.
Here’s a great ppt from ASPO on reserves, production, consumption and all that.
http://www.aspo9.be/assets/ASPO9_Thu_28_April_Skrebowski.pdf
The iceman cometh says:
December 14, 2011 at 12:05 pm
mondo says:
“December 14, 2011 at 7:38 am
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”
I like to tease the Peak Oil mob with the simple question as to why there was only 25 years of reserves in 1945; by 1970, that oil was gone, but we had 30 years of reserves; by 2000, all the 1970′s oil had gone but we had 40 years of reserves. How come? They keep telling me we are about to hit a peak – they clearly don’t even understand the question.
The answer, of course, is that in 1945 we were talking oil at $2/bbl; by 1970 there was no more $2/bbl oil but lots of $10/bbl; by 2000 there was no more $10/bbl oil but lots of $25 oil. Yes, ‘reserves’ are indeed an economic concept. But will the Peak Oil gloomsters understand that simple economics? I haven’t yet found one.
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That’s because reserves are meaningless. You are making the same mistake as the others who challenge peak oil. Which is fine. The mistake you are making is look at what’s inthe ground. Peak oil is not about what’s in the ground, it’s about how fast it can be extracted compared to demand. It only takes a small drop in production relative to demand to drive prices through the roof. That’s simple economics.
jorgekafkazar says:
December 14, 2011 at 12:18 pm
Jeff says: “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…”
That’s why oil shale is the wave of the future, and always will be.
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Always is a long time. Still making the same mistake. Peak oil is about flow rates. Oil shale will have a low flow rate, low ERoEI. Expensive to develop. Recessions caused by high oil prices will curb demand for oil, dropping the price. the price of oil will never get high enough to make oil shale viable on a large scale. Keep in mind that the Oil Sands up here has an ERoEI of only 6:1 and that does not include downstream energy costs of transportation and refining.
MAtthew Epp says:
December 14, 2011 at 12:16 pm
jrwakefield says:
December 14, 2011 at 11:15 am
“What alternative is there that has the same energy density, in liquid form, as oil? We keep hearing about this mythical alternative, but we never see anything close to oil. It’s going to take decades to switch over, we need to start now if some alternative exists.”
Man you really are a doom and gloomer. Right now with current technology, automobiles and light duty trucks, ie pickups , the type of vehicles that joe public drives everyday which account for the vast majority of the vehicle miles driven everyday and the oil consumption in the good old USA, can be converted to run on either LNG or gasoline. The reason the majority of drivers are still driving on gasoline is the availability of refilling stations for LNG is limited, however as more vehicles are equipped with this capability, the gas stations owners will see a potential market and will install the necessary equipment to provide the LNG.
It doesn’t have the same punch per pouind that gasoilne has, but it is transportable and readily adapts to current transportation technology. As for depletion of this resource? virtually limitless and currently there are known supplies of 100′s of years.
Relax, take a chill pill and enjoy your day.
Cheers!
———–
I already posted a source about the longevity of shale gas. It’s not going to last much longer none of them are making any money at it. Depletion rates are horrendous.
Correction to my previous post. I should have typed CNG (Compressed Natural Gas) not LNG. My bad.
Cheers,
Matthew
jrwakefield says:
“Oil shocks and recessions go together.”
You’re just arguing for the sake of argument. My point was that the free market adjusts to the declining supply of a commodity by pricing alternatives more attractively by comparison. I also noted the exception of price spikes due to international crises. Your links do nothing to negate the fact that events – not the lack of available supply – have caused the price of oil to spike. From the first link you posted, there’s this. [Note the graphic.]
elbatrop says:
“you fail to understand the nature and relationship of money to energy …oh and the oil embargo was a mere 5% of the total market and it threw the US into turmoil forcing it to capitulate a year later”
See my reply to jrwakefield. There is more to the price of oil than energy. There is fear, and artificially manipulating the price [OPEC], and major government restriction of supply, etc. There is ample fossil fuels for our needs, if the government cooperated in allowing production instead of sharply limiting supply. The free market provides – if allowed.
Finally, it does not matter what the total portion of the market that OPEC controlled in 1973. Oil, like any commodity, is priced at the margin. Econ was my minor, but I really don’t think it’s your specialty. If the government announced that drilling would be allowed in ANWR, the price would immediately plunge before a drop of oil was produced.
@ur momisugly Ralph
actually peak oil occurs when no amount of effort or energy expended is able to raise the production rate of oil
Every oil field exhibits this same characteristic, once it is about halfway depleted of what oil can be recovered more effort and energy cannot raise the flow rate from that field. In fact in most cases you can do permanent damage to the field by trying to over drive it harder than what the geology and physics will allow.
This logically means that once the world hits somewhere around the halfway point of recoverable oil it will no longer be possible to increase the world production rate.
Lots of people jump on the technology bandwagon blindly without checking the data, look at the tertiary techniques versus ultimate recovered oil and the scale of world oil production.
The other part of peak oil is the very nature of how mined resources are discovered and exploited, the low hanging easy to get fruit is picked first. Once the easy stuff is gone you are forced to work at the harder stuff. Take the oil sands for example, it has taken a long time to ramp up production simply because of the physics involved. You can match what has been done in Canada with the oil sands over 10 years in less than a year in Iraq at about 1/5th the cost. Economically that is a huge difference.
Archonix says:
December 14, 2011 at 11:46 am
Something to consider, with all the talk of peak oil and 40 years not being enough time to transition to another technology… how long did it take to transition from gas to electrical lighting?
The first practical lighting system was invented in the 1870s or thereabouts (system meaning not merely the incandescent light itself, but also the means to power it in a setting other than a laboratory). Gas lights were almost completely replaced within 40 years.
40 years isn’t such a short time for a new technology to become ubiquitous.
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That’s actually only true for cities. Smaller towns and villages in the boonies didnt have electric light until near WWII or after. And that was a population 1/4 of today. So not only is the change over 4 times larger, it’s also much larger because of the extent the current system is entrenched. 60 years ago I was promised by this time I’d be driving flying cars. Trips to the moon routine. I’m still waiting.
Smokey, I never said all oil price spikes were due to depletion. I said price spikes cause recessions, regardless of the reason for the spike. It’s just today oil price spikes are caused by depletion.
jrwakefield says: December 14, 2011 at 11:15 am
[What alternative is there that has the same energy density, in liquid form, as oil?]
Lot of things have the same or greater energy density, however all of them not as simple, safe, inexpensive, abundant, portable and controllable as petroleum combustion.
Hybrid rocket engines are simple, portable and controllable, but not as safe, inexpensive and abundant.
Liquid fluoride thorium reactors could be abundant and are safe and controllable but not simple, inexpensive and portable.
Volcanoes are inexpensive and simple but not very controllable, abundant, portable or safe. Meteors have similar issues and only a short lived liquid phase.