Just this morning, as I read in the Wall Street Journal how Bear Stearns turned to dust overnight, leaving all of its employees and investors wondering what happened, I tried to imagine what will happen when the oil bubble bursts. Who will be the winners and losers? How fast can it crash? Oil prices are truly resting on a paper tower right now. Anyone holding futures who does not have an empty storage tank on the end of a dock (or the right pipeline) is not going to be taking delivery. Even if you could snag an empty barge, you would have to get it to the right place, and figure out how to get the oil you own into the barge -- and you will rapidly find out that there is no one in the oil industry that will go out of their way to help you accomplish this. When prices turn, everyone must cash out or watch the investment go to zero. That's a pretty scary image.
Anyway, since everyone seems to be buying the stories propagated by popular news media about the impending shortage of oil, I thought it might be helpful to add some alternative sources of information illuminating the more likely scenario that there is plenty of oil to support projected growth. And, even at $50 per barrel, we should be able to develop and transition to viable alternatives without suffering a shortage.
In the May 2008 issue of The Journal of Petroleum Technology, a publication of the Society of Petroleum Engineers (http://www.spe.org), there is a short version of a paper presented at the 2007 Annual Technical Conference and Exhibition. The paper is titled “Assessing Past, Present, and Near Future of the Global Energy Market”, by Roberto F. Aguilera, and analyst for Wood Mackenzie in
Excerpts:
“Recent work suggests that there are enough hydrocarbons, available at production costs far below current oil prices, for society to substitute alternative sources before depletion becomes a problem . . .
“A key question is whether there are enough resources to satisfy consumption rates. The answer is positive based on research conducted using a variable-shape-distribution (VSD) model, validated by successfully comparing calculated and actual recoverable hydrocarbon volumes published by the US Geological Survey.
“Once the model was validated, it was used to estimate the recoverable conventional hydrocarbon volumes of the 937 petroleum provinces of the world, out of which 528 had not been evaluated previously. These results indicate that there are enough recoverable hydrocarbons to satisfy energy requirements for the next several decades. In our opinion, this will provide sufficient time for society to substitute other energy sources, perhaps unconventional or nonfossil.”
To their credit, the authors acknowledge that successful transition ultimately depends on whether adequate investment in alternative sources takes place on a timely basis and that there will always be the potential for events to cause temporary shortages. But, generally, they conclude that supplies are adequate to meet forecast demand, based on the growth in the world population (including increasing consumption rates per capita). If they were able to arrive at this conclusion at the 2007 price of crude oil, imagine what they would find at today's price!
What does OPEC See?
“The global reserve/resource base can easily meet forecast demand growth for decades to come. Estimates of ultimately recoverable reserves (URR) have increased over time, with advancing technology, enhanced recovery and new reservoir development. For example, according to an established industry source, reserve growth from improved recovery alone in existing fields amounted to 175 billion barrels in 1995–2003; combined with new discoveries of 138 billion barrels, total reserve growth was therefore well above the cumulative production of 236 billion barrels for that period. Moreover, technology continues to blur the distinction between conventional and non-conventional oil, of which there is also abundance, as well as with other fossil fuels. We expect the world’s URR to continue to increase in the future. Therefore, the real issue is not reserve availability, but timely deliverability, and here enhanced cooperation and dialog among all parties is essential to ensure security of demand, as well as security of supply.” http://www.opec.org/home/PowerPoint/Reserves/Conventional.htm
For your further enjoyment, here's some more great links:
Is the World Running Out of Oil? http://new.api.org/aboutoilgas/security/upload/AreWeRunningOutofOilEPorter.pdf
http://www.cera.com/aspx/cda/public1/news/pressReleases/pressReleaseDetails.aspx?CID=8444
OPEC’s view of WORLD OIL RESERVES: http://www.opec.org/home/PowerPoint/Reserves/OPEC%20share.htm
Who Buys OPEC Oil?
http://www.opec.org/library/Annual%20Statistical%20Bulletin/interactive/FileZ/worldmapz.htm
In The
Artic Resources: http://energy.usgs.gov/arctic/
Stranded Gas Technology to Boost US Production: http://www.netl.doe.gov/publications/press/2007/07061-Creating_Energy_from_Waste_Gas.html
A U.S. Department of Energy (DOE) project is turning "stranded" natural gas at marginal, or low-production, oil fields into fuel for distributed electric power. The breakthrough is bringing previously idle oil fields back into production and could boost domestic oil production by some 28 million barrels per year within the next 10 years, helping to reduce the Nation's dependence on foreign oil sources.
And a friend just sent this one in: http://www.gasbuddy.com:80/gb_gastemperaturemap.aspx
--George
Good informative post.Thanks for posting the information ...
Posted by: oil stocks | April 16, 2009 at 11:17 PM