Cultural economics is the study of how we interact with economic events and conditions. Culture, in this sense, includes our political systems, religious beliefs, psychology, history, customs, arts, sciences, and education. The term "Economics" refers to the extent and process of how we employ capital, labor and materials. If human existence is dynamic, then economics – as a science – must be able to characterize the interaction of culture and economics in contemporaneous terms.
05 May 2012
How Much Oil Do We Have Left? Really?
How much oil do we have left on our planet? Is it really 11.8
Tbl? And if we humans have only used just over 1 Tbl of our oil reserve legacy,
doesn’t that mean it will take forever to use the rest?
It would appear there may be up to 6 Tbl of conventional oil
buried under the surface of our planet (called oil in place). Most of the
remaining deposits are in the Middle East, the southern hemisphere (examples
include Brazil, and Nigeria), Venezuela, Libya, the Arctic and Siberia. Oil
sands (tar sands) contain an estimated 1.8 Tbl of oil. Key areas of interest
include Alaska, Alberta Canada, Venezuela, and the former Soviet Union. Up to 4
Tbl of oil in shale exists. Most of the exploitable oil will come from the
former USSR and the United States.
But. These estimates are from geological survey data. Much
of this oil will never be found (by drilling holes in the ground), or is in deposits
that are too small or difficult to exploit.
* Over 40 percent of potential conventional oil production
will be from reservoirs below the surface of the ocean, or from fields located
in areas that experience severe weather conditions (think ice and snow for much
of the year). Furthermore, the physics of oil production guarantees that even
when we find a good conventional oil reservoir, we will never recover 100 percent of the found oil (called
the recovery factor). For example, we typically recover less than 40% of the
oil that is actually located in a conventional oil reservoir (sometimes far
* Oil production from sands or shales is expensive and
relatively inefficient. Economically viable resources are limited, require the
consumption of other valuable resources to process the liberated oil, and will
encounter serious environmental constraints.
The investment needed to find and produce all this oil may
not happen in time to prevent shortages (and much higher prices). Capital costs
for exploration and production, for example, have more than doubled since 2000.
And there are potential cultural problems (including environmental, regional,
and international conflicts) that could interfere with exploration and
production. Taken together, these factors reduce our estimate of economically recoverable
oil to 5.5 Tbl. (Note 1)
But it gets worse. Most of the world's conventional oil supply
is coming from older deposits. Many have already gone past peak production.
OPEC (Organization of the Petroleum Exporting Countries) member nations control
a substantial percentage of the world’s remaining accessible oil reserves. Exporting countries are
in a position to control the price and availability of an increasingly scarce
And this raises the all important issue of price. How much
oil is in the ground is far less important than how much of it is accessible
"Accessible reserves are those reserves of oil and
natural gas that can actually be
found, produced, transported, refined, and
distributed without material disruption at a price the consumer can afford to
In other words, we are dealing with the entire oil supply
chain: from oil in the ground through production, refining, conversion into oil
based products, and distribution to the consumer. And of all the products made
from oil, the consumer will be most affected by the price that has to be paid
for kerosene, propane, diesel, gasoline and heating oil fuels. (Note 2)
Now let’s distill all this information down into some kind
of sanity. The following graphs review our planet’s oil reserves from two
different perspectives. The first is a volume chart that shows how escalating
production and refining costs will restrict the consumption of oil as an energy
resource (oil used to manufacture gasoline, diesel, kerosene, jet, propane, and
heating oil fuels).
We’ve already consumed just over 1 Tbl of mostly
conventional oil. This is the low cost black gold that provided the energy for the
second stage of the industrial revolution, enabled automotive and air
transportation, gave many of us the fuels for clean central heat, provided the
raw material for thousands of products, and helped to increase the production
of food. The ratio of energy return to energy investment (EROEI) was initially very
high (as much as 100 to 1).
We humans are now in the process of consuming another 1.2
Tbl of our planet’s oil reserve legacy. Exploration, production, refining and
distribution costs are increasing, while the EROEI is decreasing to a ratio closer
to 4 to 1. This is the remaining oil that I consider meets the definition of
“accessible”. By the time we have burned our way through this oil legacy, we
will be experiencing sporadic shortages. Fuel prices will be sufficiently high
to cause increasing demand destruction. Low and middle income people will drive
less. High fuel prices will begin to force lower income individuals out of the
vehicle market, and many single family households will be desperately looking
for an alternative to kerosene, propane and heating oil. (Note 3)
Because of demand destruction, it will take much longer to
burn through the next 1.8 Tbl of oil. Oil production will be dominated by
Middle Eastern nations, along with wells in deep water and hostile
environments, and the exploitation of hydrocarbons trapped in oil sands and
shales. With the exception of very rich people, corporations, and governments,
oil will gradually become too costly to use as a fuel. Wars will be won by the forces
that can deliver the most firepower for the least amount of consumed fuel.
Although we will probably pull another ~ 2.5 Tbl of oil from
our dwindling resources, most of this will be used as a raw material for
manufactured products, and bulk transportation (trucks, trains, buses, etc.).
The second graph presents this information as a timeline for
oil consumption as a sequence of events. Note that the dreaded “Peak Oil” will
occur during our current consumption of 1.2 Tbl of oil. The decline of oil
based fuels overlaps the peak oil timeline and the reduction of oil as a raw
material for manufactured products. It would appear we will have consumed our 1.2
Tbl of accessible oil by 2045. Demand destruction will be a recognized fact of
Given the close relationship of population growth to energy
consumption, the decline of the oil era will have a dramatically negative
impact on humanity. Think increased famine, inflation, and unemployment
accompanied by declining GDP in almost every nation. Think cultural chaos and
multiple rebellions. Think frustration and anger that spills over into regional
and international conflict. No government on this planet is prepared for what
Environmentalists fret over our carbon footprint and global
warming. Compared to the demise of oil as a fuel resource, that’s a tiny little
But I could be wrong. Maybe we will find some huge untapped
pool of oil in the Amazon, or technologists will figure out how to manufacture a
miraculous form of alternative energy. We can always hope.
Note 1: All of this information has been documented in my
blogs and books. Browse at your leisure. And do your own homework. For you lazy
people, here is the data I am using. Adjusted for optimistic fabrications and
outright lies, there are:
Reserves that meet my definition of “accessible” reserves
reserves 1.10 Tbl
Reserve growth and
undocumented reserves .83 Tbl
unconventional oil reserves .62
Total Accessible Reserves 2.55
Additional Technically Recoverable oil 2.95
Total Oil In Place
My projection for accessible recoverable unconventional
reserves is probably low. Fracking and horizontal drilling technology has increased the available oil resources that meet my definition of "accessible". But increased resource exploitation only provides a temporary delay of the inevitable.