Oil Age still has some time to run

It would be fair to extrapolate that Chinese per capita use and overall use is probably going to grow dramatically in the next few years and that the one statistic that passed the tipping point in 2008, non-OECD oil consumption exceeding OECD consumption for the first time, is also a harbinger of what’s to come. Indian oil use last year was a bit more than a third of China’s but it grew faster, at 4.8 per cent.

But the bigger question, coming back to peak oil, is are we going to run out any time soon?
The evidence is frustratingly mixed. BP says the world’s “proved” oil reserves last year, 1.258 trillion barrels, were 17.7 per cent higher than at the end of 1998 and 26 per cent higher than the 998.4 billion barrels we had 20 years ago back in 1988. And by the way, the latest number does not include the recently exploited Canadian tar sands — the supposed Saudi Arabia of North America. If included, that would put us 41 per cent above the original 1988 reserve number.

All of that looks pretty encouraging, particularly as last year’s ratio of reserves to annual production stood at 42 times. In the simplest terms, that ratio means global conventional oil reserves will last 42 years if production keeps going at current levels and there are no new discoveries.

That’s the good news, but on the flipside there’s a lot of muttering in the oil industry about some developing nations’ tendency to overstate their reserves for political purposes.

Against that, oil extraction technology is improving all the time and the “proved reserves” numbers are meant to refer to oil that is readily extractable by existing methods. In the simplest scenario, drillers can now send wells out horizontally to do a much more thorough job of extracting oil from existing fields than they did, say, 10 years ago.

That’s clearly a plus. But back on the negative side, there’s a difference between proven reserves and economically extractable reserves, since some deeper fields aren’t worth exploiting unless oil is closer to $US80 a barrel than $US30. With the crude price now at the upper end and rising, that will increase the amount of economically recoverable oil. Miners would say it’s lowering the cut-off grade.

The Australian