Yes, there is an inflation risk. Yes, both Britain and the US are in rate-raising mode. And yes, there are anxieties over terrorist attacks on oil installations. But the world is not running out of oil.
There may be many fears spooking the world's oil markets. But there is no oil "shortage", just as there was no oil "shortage" in the early 1970s or the early 1990s. There are our own apprehensions. And then there are the facts of the matter.
According to a paper in the latest edition of Science magazine, proven world oil reserves exceed 1 tn barrels. Overall, the paper reckons that the world retains more than three trillion barrels of recoverable oil resources. Far from oil "running out" as some might have it, the big story of the oil industry over the past 50 years has been the way in which technological change has continuously worked, not only to yield up new discoveries but also to upgrade the size and extent of existing fields.
The paper, Never Cry Wolf -- Why the Petroleum Age is Far from Over, cites the example of the Kern River field in California, first discovered in 1899. Calculations in 1942 suggested that 54 mm barrels remained. In fact, over the next 44 years the field produced 736 mm barrels and in 1986 was reckoned to have another 970 mm barrels remaining.
From 1981 to 1996, the estimated volume of oil in 186 well-known giant fields across the world discovered before 1981 rose from 617 to 777 bn barrels -- and this without new discoveries. This trend, the paper argues, is likely to continue. For example, the Kashagan field in Kazakhstan was deemedin the second half of the 1990s to hold between two and 4 bn barrels.
In 2002, after completion of only two exploration and two appraisal wells, estimates were officially raised to between seven and 9 bn barrels. In February this year, after four more exploration wells in the area, they were raised again to 13 bn barrels. Recovery rates from fields worldwide have also increased, from about 22 % in 1980 to 35 % today.
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