Reserves numbers aren't oil's only market perplexity

Bob Tippee

Numbers about the oil and gas market aren't always what they seem to be.

It's forever disturbing, for example, to see elaborate arithmetic performed with reserves data.

Nobody can measure oil and gas reserves. The numbers are estimates based on interpretation—often quite a lot of interpretation—of sparse data about indirect indicators like well and seismic information.

Yet people who don't know better see numbers and assume they represent measurements, as if from some geophysical dipstick. Reserves aren't measurable and probably won't be anytime soon.

Even market factors that are, unlike reserves, at least theoretically measurable can be just as difficult in the vast, complex, and politically influenced oil and gas business.

In its Oil Market Report this month, the International Energy Agency discusses vagaries of numbers representing global oil supply and demand, which of course play no small role in determining oil prices.

IEA calls attention to a category in its monthly oil-balance table called "miscellaneous to balance."

This is the rubber ruler of petroleum economics, an important tenet of which is that supply and demand always balance, net of inventory changes, at some price. The numbers, though, never add up.

The problem isn't the theory but rather the myriad measurements in the equation. Some of them turn out to be nearly as reliant as reserves are on estimation and interpretation. Into this category fall such vital numbers as Chinese demand and inventories outside industrialized countries.

IEA addressed the difficulty in its report because the miscellaneous number reached a hefty 1.3 million b/d in the second quarter.

In addition to the timing disparities and fuzzy-number areas that always bedevil oil balances, IEA said, the growth category of ethanol and biodiesel demand has become a challenge. And many countries still won't publish important data.

Adjusting for estimated errors in the uncertain categories brings the miscellaneous fudge factor down to 300,000-400,000 b/d. That, IEA says, allows analysis to focus on fundamental issues: economic growth, tight diesel and jet-fuel markets, hurricane threats, and geopolitical and project-completion risks.

Just don't forget that the adjustments, no matter how carefully estimated they might be, still can be wrong.

(Online Sept. 15, 2006; author's e-mail:

Related Articles

Twists of activists’ dogma freshens view of global warming


Fresh perspective on global warming, a topic that needs it, comes from a geologist.

Emerging producers offered guidelines for governance

06/26/2015 Like most worthy endeavors, governing oil and gas activity at the national level is easier said than done—especially where oil and gas never before...

New king reshaping Saudi oil industry; extent still unclear


A new ruler is making important changes in the state-run petroleum industry of the world’s most influential oil-producing nation.

Energy prominent among US rules due in next 12 months


Energy figures prominently in a regulatory blitz taking shape as the Obama administration approaches its end.

Political, technical problems seen for energy-subsidy reform


Fossil-energy subsidies receive more talk than action, too much of it politically opportunistic.

Oil-demand curve’s flattening adds to pressure on OPEC

06/01/2015 When leaders of the Organization of Petroleum Exporting Countries meet in Vienna on June 5, they should heed a stern signal from the oil market.

Coast Guard cadets summoned to battle climatological foe

05/22/2015 Confusion evident in President Barack Obama’s commencement address at the Coast Guard Academy raises a question bearing on American foreign policy:...

OPEC production well above quota for second month


Supply data out this week provide a useful reminder about behavior of the Organization of Petroleum Exporting Countries.

Quick supply change a vital factor in oil market recovery


Large among questions hanging over an oil market groping for balance is the behavior of short-fuse supply.

White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts

Operating a Sustainable Oil & Gas Supply Chain in North America

When Tue, Oct 20, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.


On Demand

Leveraging technology to improve safety & reliability

Tue, Sep 22, 2015

Attend this informative webinar to learn more about how to leverage technology to meet the new OSHA standards and protect your employees from the hazards of arc flash explosions.


The Resilient Oilfield in the Internet of Things World

Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.


Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected