(B) We will run out of oil in a few decades. The total world oil production probably peaked in 2008 and will be dropping in the decades ahead. With a growing world population and a much more industrialized world, worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, expect oil prices to skyrocket again and oil-dependent economies to be challenged.

The top three oil producing countries are Saudi Arabia, Russia, and the United-States. Yes, the US is still the number three producer of oil while Russia production is expanding and, Russia is likely to be soon the first oil producer in the world. About 80% of the world’s readily accessible oil reserves are located in the Middle East with 62.5% coming from Saudi Arabia, UAE, Iraq, Qatar, and Kuwait.

We are consuming currently worldwide around 84 million barrels of oil per day. The US is consuming around 25% of the world oil produced or roughly 21 millions barrels of oil per day; this is the equivalent of 100 Olympic sized swimming pools! The US produces roughly 7 barrels of oil per day and imports 14 million barrels of oil per day.

Oil is supplied to the US for 40 % from OPEC countries and for 60% from non-OPEC countries. The top five suppliers of oil to the US are Canada 20%, Mexico 11%, Saudi Arabia 10%, Nigeria 10% and Venezuela 9%.

The US oil production peaks in the mid-1970s and since then have dropped. 25% of the US production comes from 4,000 offshore platforms mostly in the Gulf of Mexico; Texas supplies 10% of the US oil, California 10% (California has been supplying oil for over 100 years) and Alaska 10% (the largest oil field in the US is in Prudhoe Bay on the North Slope of Alaska).

Crude oil and natural gas consist of a complex mixture of hydrocarbons molecules and organic compounds. It was formed from the fossilized remains of dead plants and animals exposed to heat and pressure in the Earth’s crust over hundreds of millions of years.

An oil well produces predominantly crude oil with some natural gas dissolved in it. Primary oil recovery techniques provide 20 to 30% of the oil in the reservoir. Oil is simply driven out of the reservoir by the difference of pressures between the atmosphere low pressure and the reservoir high pressure. Secondary oil recovery techniques can provide 60 to 70% of the oil in the reservoir:

• By increasing the pressure on the reservoir – some fluid such as water is pumped into the reservoir; 
• Or by expanding the reservoir – carbon dioxide (a technique called as well carbon sequestration) is injected into the reservoir (oil and carbon dioxide mixes together and expands the reservoir as a result).
  
  Most of the oil in Saudi Arabia is very light and therefore of excellent quality, and available at low production costs through primary oil recovery.
  

Offshore wells, obviously the most expensive wells, can now be drilled from 6,000 to 8,000 feet below the ocean surface and 20,000 – 30,000 feet below the ocean floor. The deepest offshore oil is 36,000 feet deep.

The lighter grades of crude oil results in the best yields to produce fuel oil and gasoline but as the world’s reserves of light oil are depleted, the oil industry is increasing its production of unconventional oil such as heavy oil that requires more complex and expensive oil refineries. Because heavier crude oils have too much carbon and not enough hydrogen, those processes generally involve removing carbon from or adding hydrogen to the molecules.

Extra heavy oil is found in a semi-solid form mixed with sand and water and referred to as sand oil or crude bitumen. In Canada, bitumen or tar sands are so thick and heavy that they must be heated and diluted before they can flow. In that process, a lot of water is used and heated with natural gas resulting in a large carbon footprint production. In addition, the water generated is quite toxic because of the heavy metals such as sulfur contained in the oil. Venezuela also has large amounts of oil sands but is missing the gas to produce the oil. Together, Canada and Venezuela contain an estimated 3.6 trillion barrels of bitumen!

Another type of unconventional oil reserves is oil shale, an organic-rich sedimentary rock, that can be found in particular in the US Rocky Mountains. Extracting oil from the shales is a very difficult and environmentally unfriendly process known as “retorting”. Simply put, retorting required mining the shale, hauling it to a processing facility that crushes the rock into small chunks, then extracting its kerogen, then upgrading the kerogen through a process of hydrogenation (which requires lots of water) and finally refining it into fuel oil and gasoline! Because of the high costs of retorting, no one has yet been producing commercial quantities of oil shales.

We have already pumped around a trillion barrels of oil from the ground. Known reserves of oil are typically estimated at 1.2 trillion barrels of oil. If you add to it the reserves of oil sands, those reserves increase to 3.74 trillion barrels and if you add to it, in addition, the reserves of oil shales, those reserves can reach in total more than 5 trillion barrels!

Because of the demand for oil exceeding the supply, oil prices are likely to skyrocket in the future. And because of their volatility, speculation might even push oil prices higher as they did last year. As oil prices increase, oil companies will become even more profitable and therefore will have the cash to invest in bringing economically the production of oil sands and maybe oil shales.

The production, refining, distribution and retailing of petroleum products is the world largest industry in terms of revenues. High oil prices will definitely keep the oil industry alive and the oil industry will likely bring to the market more and more oil that is much more expensive to produce and much more environmentally unfriendly to produce.

It is very difficult to predict when we will run out oil – may be in the next 20 years – may be in the next 40 years. But we will run out of oil. Gas reserves will last longer maybe 80 to 100 years while the reserves for coal are still enormous and could last for over 200 years. As an alternative to the future lack of oil and to be more environmentally friendly, the coal industry is working to produce “clean coal” an expensive approach to capture and store the carbon generated by the production of coal.

However, at the same time, higher oil prices must accelerate the opportunity to create and to develop a new industry that can deliver new sources of energy that are more cost-effective than oil, that are plentiful for a more crowded planet, that will preserve the remaining critical Earth ecosystems and, that are sustainable in the long-term for the environment.

Let’s not wait to take advantage of that huge opportunity in front of us.

Note 1: This article is based on the talk “State of energy address? Are we are on the right track?” from Professor Gerritsen from Stanford University on July 23rd at the Cantor Museum of Art at Stanford University and from the talk “Physics for future presidents” from Professor Muller from UC Berkeley at Kepler’s bookstore in Menlo Park last summer.

Note 2: The Hubbert peak theory assumes that the rate of petroleum production tends to follow a bell-shaped curve. The mid-1970s were the Hubbert peak for the oil production in the US and 2008 was probably the Hubbert peak for the worldwide oil production.

Note 3: The picture above is an oil sand field from Alberta, Canada.

Copyright © 2005-2009 by Serge-Paul Carrasco. All rights reserved.
Contact Us: asvinsider at gmail dot com.