The world’s remaining oil reserves are predicted to be 47 years based on actual consumption. This number, in combination with current consumption reductions due to COVID, has given rise to many analysts claiming “peak oil” has been reached and, with the help of alternative energy sources, worldwide hydrocarbon consumption will start to decline. We have seen similar peak oil arguments made in the 1960s, 1980s, and 2010s…and all proved to be utterly false. The problem with this argument is that proven reserves are not an indicator of the total available resource quantity. Oil reserves are defined as the oil that can be technically recovered that is financially feasible at the present price of oil. Clearly, this is a meaningless number since we have no idea what oil prices will be in the future. The true metric for the total available quantity of hydrocarbons in the world are the total oil & gas resources and this number is very difficult to estimate. Best industry expert opinions for total oil resources range from 10-40 times the total available reserves. Thus, based on true availability we probably have several hundreds of years of hydrocarbon resources available, even at exponentially growing consumption levels. Perhaps, the true indicator for when peak oil will be reached is not based on the availability of the resource but rather when policy and regulations (not market price) will drive oil & gas prices beyond what is affordable by industrial and domestic consumers. The reasons for these policy drivers have been discussed to exhaustively by news media and politicians, the primary favorite being climate change. It is beyond the scope of this post to discuss the argument’s merits. But to predict the outcome and un-intended consequences of politician’s policy is a fickle endeavor…just like trying to predict peak oil.
Dr. Klaus Brun
Director, Research & Development at Elliott Group, Ebara Corp