The Future for Oil

One of our engineering professors was kind enough to invite me to a lecture he was giving on the oil and gas industry. I found it a fascinating talk, filled with interesting statistics and slides from BP, Shell, USGS and other agencies. It really helps put a lot of issues related to the oil and gas industry in perspective. (I should note that the views below are mine, based on the facts and figures in the lecture, not necessarily those of the speaker)

"We need to reduce our dependence on Middle East oil" Seems obvious? After all, this is where we have all kinds of political enemies. Politicians rant about this all the time. Even the oil-loving President Bush said so. Well, nice try! Unfortunately, Middle East oil accounts for 62% of the world supply. The lowest that percentage has ever been? 56%. Even countries we don't do business with, like Iran, affect oil prices and supply. While we are at it, let's dispense the illusion that we can do away with dependence on thug countries. In that chart with oil suppliers, there are slices for thug-ruled Venezuela and not-exactly-trustworthy Russia! Oh, and just in case you think that maybe natural gas is the way, the biggest producers of natural gas include those very same countries!

Just how much oil we have left is a bit of a mystery. A quarter to a third of the oil inventory is for "undiscovered" oil, i.e. we sure hope we'll find some. Existing "proven" reserve numbers are themselves suspect - the Middle Eastern countries had a mysterious surge in their proven reserves in the 80s. Incidentally, Kuwait recently cut their proven reserve estimates by a half!

The Hubbert peak, named after the US geologist who correctly predicted the peak of US oil prediction is a little more sophisticated than a guess. The Hubbert model has so far correctly predicted (well, for a model!) US production to date (mind you, the model predictions are from 1959, rather than a model based on the benefit of hindsight). The model has been incredibly spot on so far when applied to the world oil production by later analysts. The predicted peak oil prediction - end of 2005, give or take.

"What we need are alternate fuels - biodiesels, electric, etc" If we all switch to hybrids, all will be ok, correct? Maybe, but penetration on a major scale isn't likely to happen anytime soon. More likely mass fuel sources are from bitumen and tar sands in Canada. What does that mean? More expensive oil!

When I can take some more time to read, I plan to read more on the topic. In the meanwhile, if you have any ideas or information you've read somewhere, please feel free to share it using the comments section.