Running Out of Oil?

27 April 2008


During the 1970s we were told oil would run out by the year 2000 but then new reserves were discovered. We're now told 2100 is when we'll be starved of oil. Is it possible we'll find more oil reserves in time and why have we missed them before? Can the price of oil make smaller reserves economically viable?


Alistair Crosby, University of Cambridge:

Predictions of the end of oil have a long and undistinguished history. In 1874 the state geologist of Pennsylvania said that all the oil would be gone by 1878. Needless to say, it wasn't. In the 1970s pundits predicted we would run out by they year 2000 and they were wrong too. The reason why current predictions of peak oil production are almost certainly wide of the mark is that its price has increased hugely in the last ten years with no reduction in demand. This allows the production of reserves previously considered infeasible. The greater the price, the greater the fraction of a given oil field that can be extracted out for profit.

In other words, peak oil depends on price.

A good example is the tar sands of Venezuela. It is only economic to extract the heavy oil when prices are more than $30 per barrel. The sands in these two countries alone contain more oil than the conventional reserves of the rest of the world combined. More importantly high prices allow exploration of previously inaccessible areas such as the deep continental shelves of West Africa and Brazil. Exploration here is amazingly expensive. To drill a single well can cost upwards of a $100,000,000 but the rewards are immense. It may not be politic to say so, but global warming will also keep us in oil. As sea ice melts huge swathes of the arctic will become accessible and may contain reserves as large as anything in the Atlantic. It is no coincidence that Russia, America, Denmark and Canada re all aggressively staking their claims. In the end of course, we will reach the end of what can be viably extracted although probably not in our lifetimes. By then I think we will no longer care. As Sheikh Yamani famously said, "The stone age did not end because we had a lack of stones and the oil age will not end because we have a lack of oil." We have not invented oil's replacement yet, but I think it is only a matter of time.

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