I am Principal at JTC Energy Research Associates, LLC. I hold a B.A. in Political Science from Penn State University, with a minor in Statistical Analysis. I got my M.S. in Homeland Security from San Diego State University, with a focus on Terrorism and Energy Security, and an MBA from Saint Francis University, with a focus on Energy Economics. My research specialization includes North American and international trends in liquid fuels, natural gas, coal, renewables, electricity and GHG emissions – and their connection to human development. I am a frequent contributor to Oil & Gas Journal and have over 60 professional publications in a variety of energy-related media, most recently Pipeline & Gas Journal, Carbon Capture Journal, Journal of Energy Security, Power, World Oil, Public Utilities Fortnightly and the Journal of Energy and Development. I have also been a writer and editor for reports commissioned by the U.S. Department of Energy and International Energy Agency.
The author is a Forbes contributor. The opinions expressed are those of the writer.
The short answer to the question posed is….a lot. Or at least way more than many groups and people out there want you to believe. Today, the world is swimming in oil, and prices have been sliced in half over the past year. “Peak oil” theory for production is predicated on the work of legendary geologist M.King Hubbert, who in 1956 employed his now famous/infamous “Hubbert curve” to predict U.S. petroleum production would peak in 1970. For many years he appeared to be correct, but the “shale revolution” is on the verge of proving him premature.
False pessimistic predictions regarding future oil production dates back to the beginning of the modern oil era in the mid-1850s, and can quickly ensnare the best experts with the most resources available. To illustrate, the Joint Operating Environment 2010 report (“the JOE report”) from the U.S. Joint Forces Command, the leader for the transformation of U.S. military capabilities from 1999-2011, projected a 10 million b/d global supply shortfall for 2015. Now, just five years later, we have a 2-3 million b/d surplus.
The main reason for “being so wrong” about oil’s future availability is the over-reliance on analytical techniques that fail to appreciate petroleum as an economic commodity powered by the constant advance of technology. Many predictions fall short because they too simplistically center on reserve years or the proved recoverable reserves divided by the annual consumption rate. Proved reserves grow over time, however, and estimates of the recoverable resource change as new information is acquired through drilling, production, and technological and managerial development. Another factor that affects perception is that oil companies adopt short- to mid-term planning horizons. Exploration is costly, so there is no economic incentive to look for resources that will not be needed for decades down the road. Globally, crude’s reserves-to-production ratio has hovered between 40-55 years. The 1P estimate is an estimate of proven reserves, what is likely to be extracted from a well, 90% probability. Probable reserves are given 50% certainty (2P) and possible reserves a 10% certainty (3P).
Not only has the world’s oil supply failed to disappear, but production has substantially expanded and will continue to do so. Since 1995 alone, the year that Hubbert claimed that global oil production would peak, production is up 33% to over 93.2 million b/d, and both the EIA and IEA project that output will increase by about 1 million b/d per year for years to come. New oil supply has actually been rising faster than ever. From 2010-2014, global production increased 1.215 million b/d per year, despite The Great Recession, compared to 889,000 b/d from 2000-2009. And beyond just crude oil, which is about 83% of total supply, there is a rapidly expanding stockpile of biofuels, natural gas liquids, synthetic fuels, and other sources that will continue to broaden the availability of liquid fuels. Additionally, ~66% of the oil in a reservoir is frequently left behind because it’s too expensive or difficult to extract. Commercial since the 1970s, CO2-enhanced oil recovery offers a gigantic global prize of 2-5 trillion barrels and a safe way to sequester CO2 underground for 1,000 years.
In short, the assertion that oil (and gas) are not compatible with our goal to implement a more sustainable energy system is becoming increasingly false. For example, the U.S. National Energy Technology Laboratory reports that “next-generation” technologies will make the oil yielded from CO2-enhanced oil recovery 100% + “carbon free,” up from 75% today. The reality is that ALL energy systems are evolving, so ALL technologies must be allowed to compete in our goal to: 1) grow our economy, 2) increase our energy security, and 3) reduce GHG emissions. If not, we greatly increase the risk of not deploying the most economical and cleanest sources of energy.
Global Oil Production and Proven Reserves Continue to Surge
Sources: BP; EIA
Demonstrated by the shale revolution, it’s the emerging North American unconventional resource base that has the greatest potential. And with advancing technologies and higher prices, even more will become available: the “unconventional” evolving into the “conventional.” This explains why Goldman Sachs’ 1999 declaration that oil companies constituted a “dying industry,” pointing out that 90% of global conventional oil had already been found, went so awry. The exact opposite turned true. Just take the global oil and gas mergers and acquisitions in 2014, valued at $3.2 trillion. Even at current lowered crude prices of $63 per barrel, the 1.7 trillion proven reserves alone have a value of $107 trillion – versus a global real GDP of $72 trillion. And as for the assertion that oil reserves and resources will somehow become “stranded assets” because of anti-carbon laws, nothing will be further from the truth. This insidious effort to scare off investors simply will not prevail. Developing petroleum assets will be critical to meeting rising energy demand around the world, especially since oil is the world’s most important fuel, the indispensable basis of globalization, and without significant substitute. In fact, the real “stranded assets” we must concern ourselves with are the growing 6 billion human beings that live in undeveloped nations TODAY, lacking oil and other modern forms of energy.
Global Crude Oil: Cumulative Production, Proven Reserves, and Resources
The “Google Trends” show “peak oil” is on the decline. The fall in oil prices has helped, but even in the recent years of higher prices peak oil was not a concern. It’s likely the demise of peak oil that shut down The Oil Drum, a highly informative peak oil blog that, although I didn’t often agree with the commentary, was a must read for all energy analysts (sadly, name-calling and labeling in our energy/environment discussion continues to erase the essential of “listening to those that disagree with you”). And in the decade since one leading oil expert, the late Matthew Simmons, predicted in 2005 that Saudi Arabia’s output would imminently peak, ”Saudi Arabia’s March Crude Oil Output at Record High.”
Interest in “Peak Oil” (headlines)
Source: Google Trends