Are We Actually Running Out Of Oil?

Ah the oil and gas industry, what would we do without it? Humans have been using oil since something like 4000 BC, so you can imagine that the sudden abandonment of fossil fuels is virtually impossible. According to the International Energy Agency (IEA) the global oil demand reached over 97 million barrels per day in 2016 and is steadily increasing.

But isn’t oil a finite resource? Will we run out? What about climate change, is it reasonable to stop using oil and gas altogether? What is the future of one of the world’s largest industries?

Well, while we cannot predict the future, experts from both sides have different ideas of how our dependence on oil will change in the coming decades.

Running Out of Oil

According to BP’s Statistical Review of World Energy the global oil reserves at the end of 2016 were 1.7 trillion barrels. At the current rate of usage, this translates to roughly 50 years before using up all available oil reserves.

But what does this mean, exactly?

Well, first of all, what is an oil reserve? The total global oil reserves do not include every single drop of oil on this planet. It doesn’t even include all of the oil that we know about. An oil reserve is by definition “a quantity of crude oil in discovered accumulation which can be legally, technically and economically extracted”. So any oil that hasn’t been discovered is not included (which makes sense), but it also means that any oil that is not economically viable to extract with current technology — either it is too deep or just too difficult to remove — is not included in that 1.7 trillion barrel tally. Our ever-improving technology means that oil reserves can actually be INCREASING with time, even if we continue to use oil at the current rate.

Ok fine, but oil is a finite resource, so won’t we eventually run out?

In theory — yes. Sort of.

In practice, we will NEVER use all of the oil on the planet. We’ll probably never even come close. In fact, it is likely that we won’t even discover or try to discover all of the oil on earth. The simple reason is obvious: demand. We will only be using oil so long as it is economically viable. We will eventually find ourselves in the situation where the extraction of oil is absurdly expensive, and other ALREADY EXISTING TECHNOLOGIES would actually be cheaper and more cost effective than oil. Note that this is the case even in the absence of climate change.

So no, we’re never going to run out of oil. There will never come a time when we are extracting and using that final drop of oil.

Decreasing Demand: The (Actual) End of Oil

The scenario far more realistic than reaching some peak in oil usage due to a lack of supply, is one in which we reach a peak in terms of demand. Once oil is no longer cost effective to use as the primary energy source, it will be replaced by the most economically viable alternative, effectively killing demand for oil. It’s really as simple as that. What we don’t know for sure is how and when.

Let’s tackle the how first. Well, as I mentioned, we really can’t say for sure, BUT there are a number of reasonable possibilities. First of all, there is the simple reality that as oil becomes more difficult to find and/or extract, it will become more expensive. Although technology is constantly evolving to keep increasing available oil reserves, it is easy to conceive of a situation where the technology renders extraction from the most difficult places unfeasible.

In addition to increasing difficulty in accessing oil, there is the very real issue of the existing infrastructure literally corroding as we speak. Of course this infrastructure can be replaced, but certainly not at a low cost and will require huge sums of money. With apparent decreasing government and public support for oil companies, the question becomes: where does that money come from?

This brings to light an important point: not only will there be increased difficulty in accessing oil as we burn through the ‘easy’ reserves, but there is also the small (!) issue of climate change.

With increasing awareness about climate change and specifically the role that fossil fuels have played in global warming, public support for the oil and gas industry is at a serious low. This is putting pressure on many governments to decrease support (financial or otherwise) for oil, and increase funding for alternative energy programs. This is bad for oil and gas on two levels; not only does it decrease the total money that the industry receives from the taxpayer, but it also INCREASES the chances that a new ‘green’ technology will prove more efficient and ultimately take over as the main global energy provider. This public pressure is only expected to further increase, with Millennials being the least supportive of oil and gas compared to every other generation. This lack of support even goes beyond a preference for green energy, and actually has translated into a lack of interest in being employed by the entire fossil fuel industry. This could result in a very real diminishing workforce in oil and gas as Millennials continue to age.

All of these factors come together to suggest that rising costs resulting from external pressure and lack of support combined with improved green technologies will ultimately be the downfall of the oil and gas industry.

But when?!

Again, we really don’t know (sorry). While some experts estimate that peak oil will be as soon as 2035, others believe that it is significantly further away. Either way, the prediction from BP is that oil and gas will still make up 75% of total energy use by the earlier 2035 target.

So basically, while we won’t ever actually ‘run out’ of oil (technically) we WILL stop using it likely due in part to efforts by the public to increase and improve green energy production. We just don’t know when.