Sunday, July 13, 2008

Crude oil: how much do we have?

Figure 1: World proved crude oil reserves (Billion Barrels), click to enlarge

Its always good to see how much ice-cream still remains in the tub in the freezer. So I visualized the World's proved crude oil reserves (Figure 1) with data from the Energy Information Administration. The EIA provides a wonderful excel sheet with all this data, I just made the plot.

I like some things here:
  1. The discontinuities - sharp jumps - upwards.
  2. The fact that the world-wide proved crude oil reserves have more than doubled in about 3 decades.
  3. Most of this doubling happened in active oil producing regions (the optimist in me thinks that more prospecting in other under-studied regions may yield some more discontinuities, in the right direction, i.e., up).
  4. We seem to be pumping out less than we are discovering (thats why the aggregate proven reserves point upwards)

So, why are crude oil prices shooting through the roof if there is so much buried under us? These are some supply-side* reasons:
  1. Crude oil is harder to get because new reserves are geographically challenging.
  2. Sweet light crude is harder to find, and oil companies need to look at harder-to-extract and harder-to-refine heavy crude.
  3. There is not enough refining capacity.
  4. There is not enough investment in new oil fields.
  5. Some of the crude oil lies in politically unstable regions.
Still, we have a whole lot of crude oil left. My bet is that during my lifetime (next 4-5 decades) we will end up with more proved crude oil reserves than today due to new exploration finds, and also because demand will drop due to the World switching over to alternative fuels.

Amen to my optimism!

*For some demand-side analysis see this post.

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