Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

03 December 2014

How Long Will Global Oil Last?


[To jump to the table, click here.]

Two months ago, I published an essay analyzing why pension funds and universities should divest their investments in fossil fuels. Now, with oil prices having plummeted nearly one-quarter, I look like a savant.

But in fact I’m not that smart. Nor, apparently, were others. What I did predict was that, with global supply and global demand for oil and natural gas precariously balanced, prices for these fossil fuels will be volatile for the foreseeable future, until their prices spike irrevocably just before they run out globally. I also noted that near-term factors would put downward, rather than upward, pressure on oil prices. But I could not calculate precisely when the near-term drop would come or how big it would be: there were too many variables. (As it turned out, I lost some money.)

What I did argue—and what remains as accurate as my general near-term prediction of falling prices—is that oil and natural gas are going to run out. To quote Will Rogers’ famous quip about land, “They ain’t makin’ any more [fossil fuels].” Just as we didn’t know precisely when the expected oil-price drop would come, we don’t know precisely when oil will run out.

But we do know three things. First, oil will almost certainly run out some time in the next century, likely in the next half-century. Second, when it does, humanity will be left with a gargantuan and mostly useless stranded infrastructure, which will have to be abandoned or repurposed at great expense. The stranded infrastructure will include all the world’s present and future oil-exploration equipment, derricks, drilling equipment, tankers, pipelines, refineries, airplanes, and non-electric cars, trucks and locomotives, plus the factories to make them all. Third, we Yanks will have been among the chief global cheerleaders for ignoring these two facts and failing to plan for humanity’s future.

In that earlier essay, I recounted a calculation I had done earlier for natural gas, at least what our Yankee territory has. If you take just current US energy-consumption figures, without increases (let alone compounding), you can calculate how long our known Yankee natural-gas reserves will last, including generous estimates for all our “frackable” resources. If you do that, you get the following table:

Working Life of All US Natural-Gas Reserves, Including “Fracked” Gas, Based on 2012 Consumption Rates

Use(s) of US Natural GasTotal “Burn Rate”
(Quadrillion BTU per year)
Resulting Life of Reserves
(years)
Present Uses (mostly
heating and industry)
22.61117
Present Uses and Replacing Electric Coal41.1964
Present Uses and
Replacing Transportation Oil
49.7553
Present Uses and Replacing
Both Electric Coal and Transportation Oil
68.3339

And all these numbers will decrease proportionately to any fraction of our reserves that we Yanks sell abroad.

At the time, I hadn’t yet done a similar calculation for oil. But it’s easy to do. OPEC has helpfully given us a simple chart of known global oil reserves for 2013, with generous estimates of OPEC’s own. And our own Yankee Energy Information Administration has given us a good figure [scroll down in chart to “world”] for global consumption of oil: 90.376 million barrels a day for 2013, or 32.987 billion barrels per year, increasing at a recent rate of more than 1% per year.

Diplomats and energy experts have lots of doubt about OPEC’s own reserve figures, especially those for Saudi Arabia itself, which accounts for about 22% of OPEC’s reserves. They think Saudi Arabia has overestimated its recoverable reserves by anywhere from 40% to 70%.

But all OPEC petro-states have an incentive to overestimate their reserves, both to attract foreign investment and technology and to increase their clout within OPEC. So the following table presents the reserve-longevity figures under several different assumptions about the accuracy of OPEC’s 2013 reserve estimates. Just to be conservative, the table also reports estimated global-reserve longevity under the assumptions that all OPEC reserves estimate are accurate, and that non-OPEC reserves are underestimated by a factor of two (i.e., are 50% below the correct figures).

Working Life of All 2013 Global Oil Reserves Under Various Assumptions
(Based on 2013 global consumption, compounded at 1% annual increase)

AssumptionTotal Global Reserves
(Trillion barrels)
Life of Reserves
(years, rounded)
OPEC’s figures for Non-OPEC reserves are 50% low1.77443
All OPEC’s reserve figures are accurate and 100% recoverable1.4937
OPEC’s reserve figures for OPEC are 40% high or 60% recoverable1.00827
OPEC’s reserve figures for OPEC are 70% high or 30% recoverable0.64618


These numbers assume that all non-OPEC oil reserves, as estimated by OPEC, are 100% recoverable. They speak for themselves. I’ll just make three comments and ask two questions.

The first comment is a warning for China. It has effective ten-year terms (each comprising two five-year plans) for its top leaders. So, in the worst case, the very next top leader after Xi could have to wrestle with oil running out globally, in the most populated and most polluted nation on the planet, still climbing its rapid growth curve.

The second comment has to do with the relative longevity of oil and natural gas for us Yanks. If we Yanks don’t convert our vehicle fleet to natural gas but continue phasing out coal in favor of natural gas for electricity, natural-gas reserves on our own territory will last about a generation longer than global oil reserves.

But they will have that extra longevity only if we don’t sell them abroad, and only if we don’t convert our vehicle fleet to natural gas as global oil supplies dwindle. If oil and natural gas become interchangeable fuels for transportation, and if we Yanks sell our natural-gas reserves into a global market, that extra longevity will decrease or vanish.

Thereafter, we Yanks, along with the rest of humanity, will freeze during winter. We will starve all the time, because our agriculture and its infrastructure depend on fossil fuels, chiefly oil. Lacking an entirely electrified transportation infrastructure and a non-fossil-fuel energy infrastructure of anything like today’s scope, most of us will sit immobilized in the dark. Maybe the rich will still be mobile, perhaps along with an elite political class like the old Soviet Union’s.

Unless we wise up and work hard, this sad fate will befall children born this year or next, most likely within the next five decades. Then your kids or theirs will suffer the avoidable tragedy of a predictable and predicted catastrophe of energy scarcity and a stranded, very expensive but then useless energy infrastructure. Talk about “generational theft!”

The two questions are these: First, do we humans really want to continue to bet our entire civilization on an energy infrastructure that took us over a century to build and that will become obsolete in a few decades? Second, do we really want to do so when continuing to rely on it is cooking our planet and changing our climate, much for the worse?

The final comment is short and plain. These numbers predict a rapidly approaching species-wide crisis. No nation or people will escape it. Paradoxically, some of the least-developed nations—those that use a fully renewable resource like animal dung for fuel—may suffer the least. The nation or nations that first get out in front of the inevitable energy transformation—the most crucial in our species’ history—will increase their survival potential and their chances for medium-term and long-term happiness and prosperity.

Although the transformation ultimately will lower energy costs (1 and 2), it will require some expensive capital investment. Parts of it may be socially disruptive and time-consuming. But it’s eminently doable. Except possibly for making nuclear energy non-weapons-proliferating and safe, it requires no fundamental advances in science or engineering.

Those who start sooner will finish first. Germany, with its comprehensive Energiewende, is first today. France, which uses nuclear power for three-quarters of its electricity, is first in the current fraction of total energy that does not come from fossil fuels. China, with its strong solar and wind energy industries and world-beating plans for nuclear power, is not far behind. When will we Yanks stop pretending that oil and natural gas will last forever and start acting like global leaders in science, technology and engineering again?

Endnote on coal: There is, of course, a Faustian fossil-fuel alternative: coal. We could return to that horrendously polluting fuel, burning which spews out asthma-causing particulates, sulfur dioxide and mercury and makes acid rain. We could double the acceleration of global warming and make every city on our planet look, smell and feel like Beijing or Shanghai on a bad day.

The undesirability of doing all that speaks for itself, too. If our species drags its collective heels in converting to renewable and safe nuclear energy, the most likely result would be to turn our lovely planet into a hot, wet and grossly polluted human habitat, with much less usable land area, resembling nothing so much as the medieval concept of Hell. (For a realistic assessment of the prospects for coal-effluent sequestration, click here).

Endnote on consumption compounding: The foregoing table (for oil only) takes into account a compounding increase of global oil consumption, at an assumed rate of increase of 1% per year. That’s smaller than the actual rate of increase for the last several years, but computing a mean or medium would have been statistically meaningless.

In fact, the rate of increase is likely to increase, at least in the near term, as the BRICs, not to mention Africa, continue to develop economically and produce oil-guzzling cars and trucks at an accelerating rate. The effect of a higher consumption compounding rate would, of course, be to shorten the working lives shown in the table.

The formula for consumption compounding is similar to (but not the same as) the formulas for level-payment mortgages and present/future value. (It can be derived by much the same math trick. Just multiply the summed series by [1 - (1 + i)] = -i, and all but the first and last terms drop out by subtraction.) The resulting formula reads as follows:

R/C0 = [(1 + i)N+1 - 1]/i


where R is the exhaustible reserves, C0 the initial annual consumption rate (in the same units), i the annual rate of increase (expressed as a decimal, here 0.01), and N the number of years to exhausting R. Solving for N involves: (1) beginning with the number of years to exhaustion at the initial consumption rate (R/C0) and (2) finding, by trial and error, the integral value of N that most nearly fits the foregoing formula. (Google’s xy calculator can calculate (1.01)N instantaneously.) The effect of compounding, of course, is more significant for longer working lives.

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