In 2005, the New York Times article ‘What Happens Once the Oil Runs Out?’, estimated ‘peak oil’ to occur between 2000 and 2010, ‘Peak oil’, being the theoretical maximum rate of extraction the world can reach before the oil industry enters a terminal decline. A devastating prediction, that, if true, would have resulted in a downturn in prosperity and quality of life the world over. The original 1970 prediction was proposed by M. King Hubbert, an American geologist and geophysicist, in 1962. It was then later extended to 2007, in true Nostradamus fashion. A decade later, in the current year, it is pretty safe to assume this prediction was unfounded.
Anyone who is familiar with the current situation in Venezuela is probably aware that it currently has the largest proven oil reserves in the world. Similarly, Canada, with its oozing Tar Sands, is now that largest imported source of US oil, almost three times as much as Saudi Arabia. In both cases, these options were not available just a decade ago. The question is, were these discoveries just a massive stroke of luck? Not to mention, if Venezuela has so much oil wealth, how has their GDP fallen by 40% since the discovery of the precious natural resource? The answer to these questions can shine a light on why some believe we are on the brink of running out of oil.
Let’s start with Canada. How did the Canadian Tar Sands go from being unrecognized in world oil reserves, to being the US’s largest source of oil? As the ‘peak oil’ alarmists like to point out, oil is a finite resource. As demand increases and world reserves decrease, of course, the price of oil increases. As the price of oil increases and technology to extract oil improves (e.g horizontal drilling), the incentive to extract, once uneconomical sources, increases. We didn’t extract oil from Canadian tar sands a decade ago, simply because it was too expensive to make a profit. After oil prices hit $100 a barrel, this suddenly changed. So far from a miracle, market forces were at work.
A traditional oil well will extract about 5-15% of the total oil in that location, due to the increasing costs of extracting harder-to-reach oil. The proven oil reserves in Venezuela have been known about for close to a century now. As the price of oil increased, it suddenly became profitable for oil companies to build wells in order to pump the once prohibitive oil fields. As oil prices increase, these market forces protect future resources. Today’s prices limit the demand to those who can currently afford it, keeping the accessible supply steady, indefinitely. While it may be physically possible to extract all the world’s proven oil reserves, the cost and reduction in prices are too prohibitive.
But what happens when we run out of current proven Canadian, Saudi, and Venezuelan oil reserves? Well, the operative word in that question is ‘proven’. Similarly, as the cost of extracting oil can be prohibitive, so can oil exploration. Oil exploration is a massive financial risk. While it’s perhaps within the wit of man to scour the globe for every drop of oil, there just is no reason to.
Hopefully, in the future, renewables will slowly take over the majority of world’s energy production, particularly in less developed nations. Currently, in the West, renewables aren’t capable of making reliable profits without substantial subsidies that will need to slowly dissipate before making that transition. As societies begin to make their choices regarding future energy production and consumption, it is important to make sure that these decisions are not being made under the faulty assumption that we’ll be running out of non-renewable fuels anytime soon. Instead, let’s hope that these choices will be decided with the knowledge that while non-renewables will likely always be around in part, a dependency on a non-renewable resource that acts as a cornerstone of our civilization, probably isn’t a great idea.
Bibliography: http://www.nytimes.com/2005/03/25/opinion/what-happens-once-the-oil-runs-out.html http://uk.businessinsider.com/statistics-about-venezuelas-economic-collapse-2017-8?r=US&IR=T http://www.worldatlas.com/articles/the-world-s-largest-oil-reserves-by-country.html https://www.eia.gov/tools/faqs/faq.php?id=727&t=6
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