Oil Reserves About to Leap

The environmentalists point to anything that moves and call it 'Peak Oil'. In fact, they are now claiming that the dramatic drop in price is caused by Peak Oil! This is in addition to their claims that the dramatic rise in price was caused by Peak Oil.

As I’ve noted previously the dramatic falls and rises in price are indication that we are hitting peak oil.

Next I expect that environmentalists will claim that Peak Oil is causing the changing of the seasons.

Back in the real world, which you and I actually live in, we can see that oil reserves are on the way up. I did this little graph which is interesting. It shows the total oil reserves since 1980, along with the price (in current US dollars).

As you can see, reserves have been growing all the time. This is despite the fact that we have been using an ever-increasing amount of oil each year. How can it be that using more creates more?

Economists would tell us that the total reserves is only an estimate based on the value of oil and the resulting amount of effort that people have put in to find it. With around 40 years of oil in the bank, it doesn't make a lot of sense to invest money to find more, unless of course the newly found oil is very cheap to extract. So what we are seeing is probably that companies find more oil as and when it is needed.

The reason for price on the graph is because price is a significant determiner of the amount of effort that is put in. In 1998 with oil at $10 a barrel no one in their right mind was looking for more. It was obvious to all but the environmentalists that no one wanted oil and there was plenty of it anyway.

The rise in oil prices since 1998 has changed that view. Oil men are cynical old bastards, but even they have been caught up in the excitement of oil going over $100 a barrel, and predictions of oil going back down to $10 a barrel are few and far between. Oil exploration has slowly started up, gathering pace and urgency as the price rose. Sadly it can take 10 years from finding oil in the ground to actually shipping it, so this process does not produce immediate results. And now that the price has dropped back, there will still be some inertia and many projects will still complete, to provide the oil we need in the next decade or so.

So there is a strong relationship between price and oil exploration, and I believe it is possible to see that in the graph above. From about the mid 1980s the price falls back to 'normal' levels and the reserves increases seem to drop off a bit. Given the lag, I believe we could be about to see an increase in reserves again due to the last 10 years of higher prices.

Some early evidence of this is available. I am keeping a little list of what oil finds are out there. Here it is in part:

Where	Reason	Amount Gb	Year found
Arctic circle	New evaluation	90	2008
Greenland	New find	110	2001
Cuba	Restatement of reserves	20	2008
Brazil	Find off the coast	33	2008
USA	Bakkan	3.5	2008
New Zealand	Gisbourne	12.6	2008
Iraq	Possible new finds	100	2007
Total		369.1

If and when the above are proven, they will increase reserves by about 369 billion barrels, or around 10 years of supply.

To see that peak oil is a scam, environmentalists need to understand only one thing about economics: price influences supply. As I never tire of saying, the stone age did not end due to lack of stone, and for that matter the coal age is fading in New Zealand while we still have 2000 years of coal in the ground.

The oil age will not end due to lack of oil.

(Data are from BP's excellent site)

Comments

[Andrew W]

What oil in Greenland? What oil near Gisbourne??

[The Optimist]

If you follow the links above you will find some information:

The first (NZ) was written by environmentalists in the news media, so is pretty negative:

Trans-Orient claims an independent report predicts the area potentially holds 12.6 billion barrels of oil but local oil expert John Pfahlert from the Petroleum Exploration and Production Association says their claim is highly implausible and says it's entirely possibly that they would get nothing.

Greeenland:

Greenland is believed by some geologists to have some of the world’s largest remaining oil resources.[26] Prospecting is taking place under the auspices of NUNAOIL, a partnership between the Greenland Home Rule Government and the Danish state. U.S. Geological Survey found in 2001 that the waters off north-eastern Greenland (north and south of the arctic circle) could contain up to 110 billion barrels (17×109 m3) of oil.[27]

[Andrew W]

On your table you have "year found" that's nonsense, commercial oil hasn't been found in either Greenland or off Gisbourne, so any oil in either location cannot be included as reserves.

The US geological survey put out theoretical figures for undiscovered oil in locations around the world including Greenland in 2000, Ever since those who dream that oil is a near endless resource have quoted those figures.This from Sonia Shah's book CRUDE:
"The USGS's presentation was authoritative but the numbers were at least as speculative as those of Shell's managers and Iraq oil ministers. In the case of Greenland, for instance, the government geologists had determined there was a 95% chance of finding just a single barrel of oil. But ever-optimistic, the USGS noted that there was indeed, in the farthest reaches of probability, a 5% chance of finding vast amounts of oil. The precise amount they predicted could be discovered was no less than 111.8 billion barrels, just 2 million barrels (sic) short of Iraq's 112 billion barrels of proven reserves."
The numbers they produced actually had no basis in geology.

[Andrew W]

If you're interested in the geology and business of oil I recommend "A Thousand Barrels A Second" by Peter Tertzakian, Tertzakian started his career as a geologist and is now Chief energy economist of ARC. He's not a someone with an ideological ax to grind like many others, rather he sticks with the science and ignores the politics.

[The Optimist]

Actually I am not talking about reserves (which means proven reserves I think). I am talking about oil discoveries. That means parts of the world which look promising for oil and could turn into proven reserves one day.

Of course these areas are not in the bag yet. With 40 years of oil up our sleeve, it would be commercial suicide to spend a lot of money trying to guarantee even more oil. But I am making the point that there is oil popping up all over the place, and no sign of it fading away.

Thanks for the book pointer - have added to my wish list...have a shelf to get through already so I am on a 'book ban' for at least the next few months.