The world’s remaining oil reserves are predicted to last 47 years based on current consumption. This number, in combination with recent consumption reductions due to COVID, has led many analysts to claim that “peak oil” has been reached and that, with the help of alternative energy sources, worldwide hydrocarbon consumption will begin to decline.

We have seen similar peak oil arguments made in the 1960s, 1980s, and 2010s — all of which 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 and is financially feasible to extract at the present price of oil. Clearly, this is a meaningless number, as 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 is total oil and gas resources — and this number is very difficult to estimate. The best industry expert opinions suggest that total oil resources range from 10 to 40 times the total available reserves. Thus, based on true availability, we likely have several hundred years of hydrocarbon resources available, even at exponentially growing consumption levels.

Perhaps the true indicator for when peak oil will be reached is not the availability of the resource but rather when policy and regulations — not market price — drive oil and gas prices beyond what is affordable for industrial and domestic consumers. The reasons behind these policy drivers have been discussed exhaustively by news media and politicians, the most common being climate change.

It is beyond the scope of this post to discuss the merits of that argument. But predicting the outcome and unintended consequences of political policy is a fickle endeavor — much like trying to predict peak oil.

Dr. Klaus Brun
Director, Research & Development at Elliott Group, Ebara Corp