Peak Oil is You
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Page added on July 6, 2016
Oil or nothing
The United States has more oil than Saudi Arabia, says a new study by Norwegian consultancy Rystad Energy. The size of American reserves, at 264 billion barrels, is around a fifth higher than what is estimated to be located in the desert kingdom. That’s a surprise. But it’s also beside the point. Oil supremacy goes not to the one who has most, but the one who controls the price.
Reserves are an important measure for estimating future supply and the potential earnings of producers. But they are only worth counting if they can be produced economically over time. Consider an extreme example: the backers of an oil discovery in south-east England known as the “Gatwick Gusher” claim it sits above 124 billion barrels. However, only a fraction of this crude may ever be sucked out of the ground because environmental restrictions -and the presence of a giant airport right next door – make it too expensive to take seriously.
Saudi – which is the world’s largest crude exporter – has a big advantage because its oil is cheap to produce and largely unregulated. The same cannot be said about the United States, where the shale oil industry is being slowly asphyxiated by the collapse in oil prices over the last two years. Production in the United States has fallen by about one million barrels a day to 8.7 million barrels per day in May, when the price of crude averaged around $48 per barrel. By comparison, Saudi output has remained above 10 million barrels a day, and the kingdom says it has up to 2.5 million more it could add at any time. The ability to keep prices low means that Saudi effectively decides whose reserves are economically viable.
In reality, guessing how much oil is out there is frustrated by Saudi’s scanty disclosure. The kingdom has measured its own oil holdings at around 260 billion barrels for decades. The rate of depletion of major fields such as Ghawar – its largest deposit – is unknown. Plans for an initial public offering (IPO) of a stake in state-owned producer Saudi Aramco may push Riyadh towards lifting the veil of secrecy around its oil industry, especially if the IPO includes Aramco’s upstream assets.
One day, if wells start to run dry and other energy sources haven’t taken crude oil’s place, who has how much of what will matter deeply. But until then, supremacy in oil reserves is less important than influence over prices. In this regard Saudi is still unchallenged.
7 Comments on "Oil or nothing"
dave thompson on Wed, 6th Jul 2016 8:42 pm
There will be nothing, when it comes to replacing oil. Saying the US is sitting fat with oil reserves, is obviously some kind of sales pitch. Don’t worry folks all good, nothing to see, but prosperity as far as the blind populace can see.
Anonymous on Wed, 6th Jul 2016 8:47 pm
RoFL, amerika’s oil idiocracy on display. As if the ‘saud’s control world oil prices lol. I see this uS-has-more-oil-than-anyone-else meme is gonna be around for a while until it gets replaced by some other equally stupid meme(TBD) about uS energy reserves, resources, w/e.
Rick Bronson on Wed, 6th Jul 2016 9:18 pm
Wow, USA is the new champion, but its production is going down as most of its rigs are idled.
They are waiting for price to go up. Hmm, the alternative fuels in the transport sector are holding it down.
There is no mention about the cost of extracting these reserves.
yoshua on Thu, 7th Jul 2016 3:12 am
The Original Oil in Place in Saudi Arabia has been estimated to be 530 billion barrels. Saudi Arabia has to this date produced 140 billion barrels or about 25 percent of the OOIP.
Through Primary and Secondary recovery the global average recovery of the OOIP is 30 percent.
Saudi Arabia and the entire Middle East is now forced to shift to Tertiary Recovery or Enhanced Oil Recovery which is a much more expensive form of production and much more energy intensive.
If fact Saudi Arabia has already officially started its Enhanced Oil Recovery project at the giant Ghawar oil field.
The Middle East can no longer produce oil at $50 per barrel. The days of easy oil is over.
Sungr on Thu, 7th Jul 2016 3:44 pm
Rystad is full of BS. USA is the most drilled up piece of RE in the world.
The only way this whore will significantly produce is by the application and consumption of massive amounts of resources put to the task.
The frac oil will only fill the gaps between big older fields and newer (too)high cost targets.
And the energy resources needed to run all the fracking plays is basically just cheap oil from older fields which are deep into depletion.
JuanP on Thu, 7th Jul 2016 4:30 pm
Guys, I think all Americans should be really smart and patriotic and invest in American oil companies immediately. The USA can be great again! I know that is so because Trump said it. You should also invest in American stocks, bonds, US treasuries, and US dollars. Anyone can see these things have nowhere to go but up.
Do you want to be a millionaire or do you want to be left out?
dissident on Thu, 7th Jul 2016 5:14 pm
Reserves, shmeserves. Oil production is all that matters. And the US has had to produce from non-conventional sources. The US conventional production is about 5.3 million barrels per day and falling.
Also the “oil” production in the USA includes all the ethanol from corn. The Bakken tight oil and similar deposits are not something to boast about. The Bakken was showing signs of decline even before the price crash. Eagle Ford is just some more dregs at the bottom of the barrel.