[sustran] Oil depletion

[Charlie Richardson]

I just have to make a comment on the recently posted Los Angeles Times
article "The Coming Oil Crisis .. Really".  Whilst I am very glad that
the subject is broached, the article repeats a fundamental error which
has the effect of diluting the importance and imminence of oil
depletion.

In particular, the fifth paragraph, which, referring to the previous
paragraph's claim that there remains somewhere between 1000 billion and
1600 billion barrels of exploitable oil, begins "That may sound like a
vast amount, but at the current rate of world oil consumption, 1,600
billion barrels would be depleted in about 60 years."  

There are two points to dispute here.  The first is that it is unlikely
that there exists 1600 billion barrels of remaining economically
extractable oil.  Most estimates are less than this, and the best
respectable estimates are in the region of 800 to 1200 billion barrels.

The second point, and this is the major one, is that to say (as the
article says) that "at the current rate of world oil consumption, 1,600
billion barrels would be depleted in about 60 years" demonstrates a
misunderstanding of oil depletion.  It is not a surprising
misunderstanding because the oil industry itself couches the situaiton
in these same terms, i.e. in terms of 'how long until we run out'.  To
work out this mythical date, the industry makes a calculation of the
total amount of (economically expoitable) oil remaining in the earth,
divides it by the world's annual consumption and, hey presto, you get a
number of years until we 'run out'.  This method even has a nice
scientific sounding name, the 'reserves/production ratio'.  

But is this method any more useful to us than, say, knowing that the
amount of producible oil left would fill a cubic container approximately
6.5 Km on each side?  Or that if spread evenly over the Earth's surface,
land and sea, it would be about half as thick as the gap in a spark
plug?  The truth is that all three ways of looking at it are as useless
as each other.

To seek to find out when we will 'run out' implies that we also think
that up until a certain date we will not have a problem, and then wake
up and find that there is no more oil left, just as though someone had
turned off a tap.  How likely is this?  Is the oil sitting in some vast
underground cavern from which we can simply pump oil at a constant rate
until it is all gone?

There are literally thousands of oil fields around the world.  They
contain vastly differing quantities of oil, trapped in the pores of the
undergound rock.  They began being exploited at times decades apart. 
They contain oils of differing viscosities under differing pressures. 
The porosity of the rock which contains it differs from field to field. 
They are certainly not all going to 'run out' at the same time.  What
this means is that instead of the world's oil suddenly 'running out',
production will go into a long slow decline.  That sounds easier for the
world to handle.  It aint necessarily so.

The crucial question is not 'when will we run out', but 'when will oil
supply fail to meet demand'.  The answer is 'frighteningly soon'.  In
the closing months of 1995 a report called 'The World's Oil Supply 1930
- 2050', co-authored by Dr. Colin Campbell and Jean Lahererre, was
released by Petroconsultants of Geneva.  It is important to understand
the status of this report and of Petroconsultants.

Petroconsultants is in a very special position.  Since the 1950s they
have been fed data on oil exploration and production by just about all
of the major oil companies and a network of about 2000 oil industry
consultants around the world.  They use this data to produce reports on
various matters pertinent to the oil industry which they sell back to
the industry.  No other company, or government for that matter, has such
a comprehensive database.  'The World's Oil Supply 1930 2050' amounts to
an audit of the world's oil supply, and projects production from each
field, region and country into the future years.  It is a very major
piece of work, and the costs of maintaining the database and the
detailed analyses of it are reflected in the price of the three volume
report.  It costs US$32,000.00 per copy.  It is, in effect, investment
advice for banks, other large financial institutions and governments
trying to ascertain our future oil prospects.  Only a few dozen copies
of the report have been sold around the world.

The upshot of the report is that the world is close to peak production
of oil.  While it is very difficult to say exactly when production will
fail to meet demand because of the varying factors influencing demand
(economic circumstances, the weather in North America for instance), it
will not be more than about five years away for the world as a whole.
The Gulf region has the best potential for continued supply, with Iraq
following Saudi Arabia in having the best flow of oil during each of the
years of the next couple of decades.

Remember the 1970s?  In 1973, in reaction to the west's perceived bias
towards Israel, the Arab members of OPEC (Organisation of Petroleum
Exporting Countries) supported price hikes and embargoes on oil.  Again,
in 1979, the price of oil shot up as a result of turbulence in Iran as
the Shah fled Khomeini and his supporters.  These events demonstrated to
the OPEC member countries that when the percentage of world oil supply
coming from their fields reached a certain point, the world had no
choice but to buy from them, no matter what the price.  It demonstrated
to the industrialised world how dependent on oil their economies had
become, and the inflationary effects of the price rises was disastrous. 
The 'oil shocks' and the inflation they caused led to widespread
unemployment around the world, and the flow of capital was grossly
distorted from what had been the norm.

These oil shortages were overcome through the development of fields
discovered in the previous decade in the North Sea and Alaska and
elsewhere.  There were also some new discoveries.  Strenuous diplomatic
efforts also played their part, helped along by agreement to sell more
hi-tech western weaponry to the Gulf States.  As well, the
industrialised world went on a frenzy of oil conservation measures, even
extending to the fitting of sails on oil tankers to reduce their fuel
consumption.  Western governments forced car manufacturers to produced
more fuel efficient vehicles.

As demand for oil fell because of these measures and more oil became
available from outside the OPEC countries, oil prices tumbled and those
countries began to squabble among themselves and exceed their quota of
sales in order to make up in bulk sales what they lost in price per
barrel.  This led to the oil glut of the 80s, which in turn undermined
the Soviet economy and hastened its downfall, because oil sales were the
Soviet Union's main source of hard currency.

It is difficult now, part of the way through 1998, while we are awash
with cheap oil, to imagine that we shall soon find ourselves back in a
situation similar to that of the 70s but PERMANENT.  But the percentage
of oil coming from the Gulf countries is again rising to the levels of
those earlier crises.  The penny will drop soon and, realising the
opportunity, OPEC is likely to rise again as a dominant force in
politics and economics. The results are difficult to predict, and we
cannot comfort ourselves with the idea that we can just go out and find
some more non-OPEC oil.

All the world has, just about, now been extensively searched for major
new oil fields using technologies undreamed of even only a few decades
ago.  The 30 biggest companies invested US$417 billion in oil and gas
exploration and development from 1982 - 1992, but only found oil and gas
worth US$170 billion.  75% of all oil has been found in giant fields
(greater than 500 million barrels - a barrel equals about 160 litres),
and we virtually stopped finding giants since the 80s.  We are consuming
oil at about 23 billion barrels per year and rising, and discovering it
at about seven billion barrels per year and falling.  This is not
looking good.

The constraint on oil production is caused by geology.  We cannot fix
this situation with diplomacy or weapons sales any more than we could
use weapons sales or diplomacy to stop continental drift.  It is more
than time for the world to understand the predicament it is about to
find itself in, and to understand that it is going to need to either
find other ways to support economic growth or else to find some
principle other than growth upon which to base its economies.

The knee-jerk reaction to OPEC, the Gulf states alone or even a single
oil rich country exploiting its position at a time of permanently
dwindling supply will be a military response, justified by some event or
other.  That military response would be caused, as much as anything
else, by the extreme vulnerability of the military itself to oil
shortages.  Wars are not remotely fuel efficient.  But we must bear in
mind that this will give only short term gains, and also bear in mind
that in the three months of the Gulf war the allied forces used more oil
than Kuwait, which was the prize, produces in a year.  It wouldn't hurt
either to remember that the production of each body bag a dead soldier
is sent home in uses about three cups of oil in its production.

The potential for conflict between nations with a thirst for oil is also
high.  Already we have seen the USA and UK at loggerheads with France
and Russia over the embargoes against supplying Iraq or the purchase of
Iraqi oil.  It is said, and confirmed in a recent report to the US
president on funding for research and development for energy, that 25%
of the vast US military budget (largest in the world, and six times
greater than its nearest rival) is directly related to maintaining
America's ability to 'protect' the Gulf.

The world's deposits of oil, which the Shah of Iran described as a
'noble substance' too precious to waste indiscriminately, are soon to
fail us through our own short sightedness.  A person in their fifties
today will, by the time they die, have lived through virtually the
entire period of the benefits that cheap oil has given us, and that
person's retirement, and the working lives of younger people, are
unlikely to be what they thought it would be at all.

In the 1960s, the world's population was around 3.5 billion.  The
world's agriculture was not up to feeding them, so many were starving. 
Now, we have about 6 billion people, and other than famine occurring as
a result of warfare, they are mostly better fed than during the '60s. 
The lives of hundreds of millions of people around the world are owed to
oil, because oil is one of the main inputs into the 'green revolution',
which boosted agricultural production since the 1960s.  It is present in
the pesticides and fertilisers which are spread on the land, vital to
the mechanisation of agriculture and the distribution of foodstuffs.  Do
we want to drive our cars or feed ourselves?

The situation is not entirely hopeless, but depends upon developing an
understanding of the situation and finding ways of reaching consensus
about what to do about it.  We may find that equity becomes more
important than wealth to both the 'haves' and the 'have nots' of
individuals and countries.  Without wishing to sound hopelessly naive,
there is in this whole scenario the potential for a better world as we
realise that we are reaching the first and probably most major
limitation to economic growth.  On the other hand, we can just follow
tradition and tear ourselves to pieces competing over the messy, smelly,
slimy stuff that is - oil.

Charlie Richardson, sydtrans at enternet.com.au
Sydney, Australia.



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