Supply

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Supply
Supply
Where will we obtain the oil that we need?
Supply
Experts are divided into two schools: the
optimists and the pessimists.
Common
Ground
Areas of Common Agreement
Both schools agree:
1) Oil is non-renewable
2) At some point, it will become too
expensive to use
3) Burning oil generates air pollution
4) Burning oil worsens catastrophic climate
change
Areas of Common Agreement
Both schools agree:
5) Oil is too valuable a natural resource to
waste by burning in engines
6) We need to find alternate energy sources
that are not polluting
Optimists
Supply/Optimists
Optimists believe that we have many
decades worth of plentiful oil (and natural
gas) waiting to be found.
Supply/Optimists
They have several reasons for optimism:
1) Continuous improvements in all areas of
technology, from mapping underground
rock structures; through drilling; through
transportation systems; through refining.
Supply/Optimists
2. In particular, improvements in discovery
and drilling have meant that new fields
have been found (Alaska, North Sea)
and old discoveries can be tapped for the
first time.
Supply/Optimists
3. There is every reason to believe that
technology will only improve in these
areas.
Supply/Optimists
4. Many parts of the planet remain to be
explored, and
5. There are still numerous promising areas
that have yet to be thoroughly searched
(offshore of West Africa, deep in the
Caspian Sea).
Supply/Optimists
Bottom line: there is plenty of oil left, and
we will have enough time to develop
alternative fuels without difficulty.
Pessimists
Supply/Pessimists
Pessimists believe that we have only a few
decades worth of plentiful oil waiting to
be found.
Supply/Pessimists
1. While it is true that many parts of the
planet remain to be thoroughly explored,
part of that is because preliminary
searches determined that some of these
areas had no oil, or extremely little.
Supply/Pessimists
2. The promising areas may turn out to be
duds: the oil industry is littered with
promising areas that turned out to be
disappointments.
Supply/Pessimists
For example, it was believed that the
southern Caspian Sea region contained
up to 250 Billion barrels, just waiting for
western technology to be tapped.
Supply/Pessimists
After a decade and more of search, they
have found only 30 billion barrels, in a
large number of small fields, deep
underground, and heavily contaminated
with sulfur compounds.
Supply/Pessimists
3. In any case, most of the promising areas
will be where the costs of drilling them
will be substantially higher than current
oil production costs (offshore).
Supply/Pessimists
4. Much of what we have left is in
potentially politically unstable regions,
such as the Middle East.
Supply/Pessimists
5. Every year that passes without a major
discovery increases the likelihood that
there is a lot less oil to be found than the
optimists believe, because it isn’t there.
Supply/Pessimists
Bottom line: there is a lot less oil left than
the optimists believe, and we need to
start rapidly developing alternate fuels
today.
Supply
So who is right?
We really don’t know how much oil is left.
Supply:
Optimists 0
Pessimists 1
The pessimists are right to point out that a
large percent of known reserves are
controlled by OPEC.
Supply
Optimists 1
Pessimists 1
The optimists are right that technology has
found new fields, will discover more, and
will make more available from existing
fields.
Supply
Optimists 2
Pessimists 1
Pessimists have been wrong many times
before. In fact, once every thirty years
or so they predict problems…
Supply
Optimists 2
Pessimists 2
Pessimists are right in pointing out that
every year without the discovery of a
giant oilfield means finding one is less
and less likely.
Supply
Optimists 2
Pessimists 2
Without that giant, nearly everyone
agrees that there will be difficulties
starting sometime between 2010 and
2020.
Supply: Known Reserves
Uncertain?
Join the club!
Supply: Known Reserves
What we think we have are called:
KNOWN RESERVES, which are reserves
already found and available with current
technology.
Supply: Known Reserves
We used to be completely sure about known
reserves, and so the debate was about
possible and potential reserves.
Saudi Arabia
and its Oil
Saudi Arabia
Saudi Arabia has the world’s largest
estimated reserves, at about 260
billion barrels.
Saudi Arabia
Everyone is counting on Saudi Arabia to
pump enough oil to cover any
shortfalls in the next few years, or
decades.
But what if there is less oil than we are
told by their government?
Saudi Arabia
1)
2)
3)
In 1977, they reported 100 billion
barrels of proven (known) reserves.
In 1982, they claimed to have 160
billion barrels.
In 1988, they claimed to have a total of
260 billion barrels.
Saudi Arabia
1)
Since 1988, they have claimed to have
260 billion barrels every year that they
report their reserves.
2)
Yet between 1988 and 2004, they
have pumped out 46 billion barrels.
Saudi Arabia
1)
2)
The new technology for finding oil and
expanding use of older fields came
after the Saudis expanded the size of
their reserves.
In spite of 30 years of exploration they
have not found any new fields of any
significance.
Saudi Arabia
Do the math!
It is doubtful that they have as much as
they claim they have…
OPEC
and its Oil
OPEC
OPEC stands for Organization of
Petroleum Exporting Countries.
Nearly all of the large exporting countries
are members of this group, including
all of those in the Middle East.
OPEC: Kuwait
1)
2)
3)
In 1984 Kuwait reserves were 64
billion barrels
In 1985, Kuwait reserves jumped to 90
billion barrels.
In 1988, Kuwait reserves rose to 92
billion barrels.
OPEC: the others
1)
2)
3)
4)
In 1988 Abu Dhabi almost tripled their
reserves to 92 billion barrels
In 1988, Iranian reserves jumped from
49 to 93 billion barrels.
In 1988, Iraq reserves rose to 100
billion barrels.
In 1988, Venezuela went from 25 t0 52
billion barrels
OPEC
In just 5 years, OPEC reserves increased
by 305 billion barrels.
Incredible.
OPEC: Kuwait
It gets worse.
In 2006, the news magazine Financial
Times obtained documents from the
Kuwait oil company that showed its
reserves were not 102 billion barrels
as claimed, but 48.
OPEC: Kuwait
The info on Saudi Arabia and Kuwait, and
elsewhere, strongly suggest that
OPEC figures are unreliable.
To say the least…
Hubbert’s
Peak
Hubbert’s Peak
This phrase comes from the work of
American geologist Marion King
Hubbert.
In 1959, he predicted that United States
oil production would peak in 1970.
Everyone laughed at him.
Hubbert’s Peak
U. S. continental oil production peaked in
1971.
It has fallen continuously since then…
All U. S. production has declined since
the late 70’s…
Hubbert’s Peak
Other oil producing countries have
reached a peak in their production,
and have fallen since then.
So far, they have been small or medium
sized producers.
Hubbert’s Peak
This has lead some geologists to talk
about a world wide Hubbert’s Peak:
This would be a situation where global oil
production hits a peak, and then
permanently declines, because the oil
supply runs out.
Peak Oil
Hubbert’s Peak is also known as Peak Oil
Unfortunately, we won’t know when we hit
peak oil until afterwards, possibly a
couple of years later.
Supply vs.
Demand
Supply
Each column represents a year.
The dark columns on the left and center
represent the total amount of new oil
found that year.
The light grey represent projected new
finds.
The dark line represents total global
consumption for that year.
Estimates of Global Peak Oil
Six independent studies, using different
methods, all came up with about the
same time for global peak oil.
2011 to 2023
Source for the estimates of
global peak oil
Strahan, David. “The Last Oil Shock: A
Survival Guide to the Imminent
Extinction of Petroleum Man.”
John Murray Publishers, UK 2007.
Pages 200-203
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