The article, "Time to debunk mythical links between oil and politics" (OGJ, Dec. 15, 2003, p. 18) is interesting, but the author seems more at home with the business side of oil than with the science and engineering. This article, intended "to debunk mythical links between oil and politics," to me only confirmed their connectedness. Leonardo Maugeri describes in it how cheap oil led to the current consumer lifestyle, and how its very cheapness created OPEC, led to the oil shocks, and triggered the 1986 price collapse. Surely this is all politics, and on the grandest scale? Most westerners would probably be dead within months if oil were not imported through international trade, so how can oil not be a political driver?
Maugeri's "Phantom of scarcity" is not so much a phantom as a wolf. Some people have cried "Wolf!" too soon and too often in the past, but that does not mean that the wolf isn't out there. Quite correctly, Maugeri (quoting Adelman) points out that oil, like every other mineral, will never be exhausted. However, by the time the price has reached $1,000/bbl, the difference between "exhaustion" and "insufficiency" is, frankly, academic. Then Maugeri makes the astonishing statement, "The available quantity of oil depends only on time, technology, cost, and price." What about geology? By this logic, we could find oil in the mantle or on Jupiter too, if we only tried hard enough.
Maugeri suggests that reserves growth might fill the coming production gap. He describes how the Kern River field in the US produced vastly more oil than its original reserves, but let's also remember those, like Cusiana in Colombia, that produced less (Cusiana peaked in 1998 at just 250,000 b/d and then collapsed, when the EIA expected it to produce 450,000 b/d). Let's also remember that America reports its field reserves by the draconian SEC rules, which logically produce more reserves when more wells are drilled. But these arbitrary rules do not apply elsewhere, so it is thoroughly misleading to imply that the average reserves growth observed in US fields foreshadows similar growth in other countries. And finally, let's be clear that the impressive improvement in average global oil recovery between 1980 and today is more a reflection of the modern development of recent discoveries than of higher recovery from old fields.
Maugeri accepts as true every nation's declared reserves, when even a casual inspection shows that, in most OPEC states, this cannot possibly be so. Fifteen years ago the reserves of most OPEC states roughly doubled overnight, and they have barely flickered since, for entirely political reasons. Mexico even confessed to the lie.
He suggests that Saudi Arabia could simply raise production by a million b/d each year for 10 years. I believe he is correct, but not because Saudi is "Uproducing oil from only 9 or 10 of the country's 80 plus oil fieldsU" That is a dreadfully misleading statistic. Saudi Arabia may be producing from only 12% of its fields, but these include the massive Ghawar, and represent up to half of the Saudi reserve base.
Maugeri cites the well-known mantra (from Sheikh Yamani, I believe) that the Stone Age didn't end because it ran out of stones, so the Oil Age won't end through a lack of oil. I'd respond that Canada's Cod Age certainly ended because Canada ran out of cod, and that none of this says anything about oil, the most energy-dense of the natural, nonnuclear fuels on the planet.
Then he states, "Uoil will be surpassed by a new source of energy in the futureU[these energy alternatives] are all very expensive." This is the kernel of the whole paper and the classical economist's view: something will turn up, when the price of oil is high enough, because something always does.
But there isn't anything conceivable that could replace conventional oil, in the same quantities or energy densities, at any meaningful price. We can't mine the oil sands in sufficient quantity because there isn't enough water to process them. We can't grow bio-fuels because there would be no land left to grow food. Solar, hydro, wind, and geothermal don't yield enough energy, hydrogen (from water) takes more energy to make than it can yield, and nuclear fission and fusion are presently off most political agenda. The oil consumed directly and indirectly by the average American is equivalent to the work output of 135 slaves, unfed, unclothed, unhoused, and paid $2 a day between them. When oil gets too expensive, surviving Americans will still obtain energy from alternative sources, but in much smaller amounts and at much higher prices. Westerners will have to live with only a handful of slaves. And if Maugeri really feels that no one spoke about oil security issues when oil was cheap in 1998-99, then, with the greatest respect, he wasn't paying attention.
In short, and contrary to Maugeri's statement, the world is running out of oil, we can all agree that oil is finite. The economic and geological camps only differ on the timing, and the semantics of the phrase, "running out." I don't know exactly what "running out" means to a business analyst, but I'd say we'd run out when oil comes at the price of a museum specimen.
Richard Miller
BP Exploration Operating Co. Ltd.
Middlesex, UK