Home » Just the Facts » Facts: Is there really an oil shortage?

Facts: Is there really an oil shortage?

The debate on the oil situation is almost as bad as the debate on global warming and for good reason since the two are clearly linked. On the one side are the peak oil folk of whom more later. On the other side are the eternal optimists. Let’s start with them. What we know for sure is that the US is consuming about 7 billion barrels of oil a year. That is an official government statistic. So how much oil is there?

Terence P. Jeffrey editor in chief of CSNnews.com says that the Bureau of Land Management has just issued a report saying that “the nation’s undiscovered oil resources total about 139 Bbbls” or 139 billion barrels. This sounds like a huge number and it is. Mr. Jeffrey points out that this is larger than the proven reserves of Russia (60 billion), Libya (41.5 billion), Nigeria (36.2 billion), Venezuela (80 billion), Kuwait (101.5 billion), UAE (97.6 billion), Iran (136 billion) and Iraq (115 billion). Curiously Saudi Arabia is omitted presumably because no-one outside the Kingdom knows.

But put that huge number in the context of our consumption — and bear in mind that this oil lies undiscovered with much of it offshore – in fact an estimated 85.9 billion of it lying offshore. Now divide this huge number by our annual consumption and it turns out that we have just 20 years of undiscovered oil. This doesn’t sound nearly as large when put in those terms. Apparently our proven reserves in 2000 were estimated at 21 billion, which gives us about a 3 year supply of known oil.

Dan Henninger, writing in the Wall Street Journal (6/12/08), repeats these numbers, adding that there are 8.5 billion barrels of proven reserves lying in continental waters that are off-limits to oil companies because of the potential environmental damage. Assume, however, that we tapped these reserves. At our present level of consumption, those reserves would last a little over a year – and probably leave a generation of damage behind them.

The case for optimism would appear to be stronger when it comes to natural gas. According to Henninger, “our waters may old 60 trillion untapped cubic feet of natural gas.” I have no idea where this number comes from but this clearly sounds like something more substantial than the unproven oil reserves. (More on this one later.)

And then there is the oil locked in shale rock. Again, according to the Wall Street Journal’s editorial of 6/12/08 “engineers recently perfected refining solid shale rock into diesel or gas.” They estimate this deposit to contain as much as 1.8 trillion barrels. That, as the editorial notes, will keep the party going for another 200 years. But is conversion feasible? A report by The Rand Organization notes that the shale sits in the Colorado River Basin and that every barrel of oil produced will need 3 barrels of water. So, that’s 21 billion barrels of water less for Phoenix, Los Angeles and others. Will this work?

Then there is the question of cost. Earlier estimates were that it would cost $50/bbl to convert the shale to oil. Now according to an article in Business Week some engineers in Israel have new process that they hope to bring on-stream by 2010 or 2011 that will do the conversion for a great deal less. But, can they do it using less water and creating less pollution? The article does not say.

Now comes BP’s annual Statistical Review of World Energy 2010, which apparently says that at the end of 2009 the world’s proved oil reserves totaled 1,333.1bn barrels which according to Ian Holdsworth in the Financial Times means that the world has 45.7 years of oil at the 2009 rate of production. I don’t know whether this is good or bad — what it does say is that even the industry thinks my grandson will end his life on horseback unless we have a technological breakthrough.

In the same morning paper (06/11/2010) Phillip Stephens points out that “Deepwater is only there because the US, with a twentieth of the world’s population, consumes one-quarter of world oil.” This truth needs to be laid along the other one that there is drug production in parts of the world only because there is drug consumption in the US. But how to change American belief that excessive living is a God-given right?

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