A new study from the University of California (Davis) proclaims: “New forecast warns oil will run dry before substitutes roll out.”
The press release begins: “At the current pace of research and development, global oil will run out 90 years before replacement technologies are ready, says a new University of California, Davis, study based on stock market expectations. The forecast was published online November 8 in the journal Environmental Science & Technology. It is based on the theory that long-term investors are good predictors of whether and when new energy technologies will become commonplace.”
Really? Might not geology have something to do with it? Predictions that we will run out of oil have been made almost since oil was first produced in the U.S. in 1859 in Pennsylvania.
The Energy Information Administration shows that world petroleum reserves in 1980 were put at 642 billion barrels. In 2010, EIA puts world reserves at 1,354 billion barrels. How can reserves more than double in the last 30 years in spite of the increasing consumption?
The fallacy in all these doomsday predictions is that they don’t appreciate the difference between how much of a resource actually exists, versus the term “known” or “proven” reserves. The term “known reserves” is a purely economic and legal construct, which has nothing to do with how much petroleum is on the planet. “Known reserves” are that part of the total resource which have been precisely measured by extensive drilling and other means, and are “proven” to be economically recoverable with present technology. It costs money to make these measurements; exploration companies have little incentive to get too far ahead because of the expense. Every year, for at least the past 100 years, published accounts of oil reserves have stated that we have just 10- to 30-years supply left.
This situation applies equally well to other mineral commodities. For instance, in 1950 the proven reserves of copper represented a 42-year supply. Although copper consumption quintupled since then, we currently have proven reserves representing at least a 50-year supply. The concept applies also to the estimated resource base itself. For copper in 1950, the estimated resource base was 100 million tons. Since then we have produced about 338 million tons and our current estimated resource base stands at 650 million tons. In other words, technology, good geologists, and the market always find more resources or suitable substitutes.
The UC study also ignores the fact that new discoveries are being made of new off-shore resources, tar sands, and shale oil and gas, and the fact that transportation fuels can be made from our vast resources of coal.
And how well did all those investors predict the sub-prime crisis?