US crude oil reserves rise to record despite production boom

LONDON: US crude oil reserves hit record levels at the end of 2017, as annual reserve additions outstripped production for the eighth time in nine years, government data published last week shows.

Reserve growth is the main reason predictions about future oil shortages have been repeatedly proved wrong.

US policymakers have long fretted about the damage to the economy and national security of exhausting domestic oil reserves (“Oil scarcity ideology in US national security policy”, Stern, 2012).

As early as 1909, the US Geological Survey was predicting reserves might be exhausted by 1935 (“Petroleum resources of the United States - Report of the National Conservation Commission”, GPO, 1909).

Scarcity concerns became prominent again in the 1940s, the 1970/80s and the 2000s (“Market madness: a century of oil panics, crises and crashes”, Clayton, 2015). Policymakers responded by pressing for more conservation, encouraging the development of overseas reserves, reserving domestic supplies for future military needs, or experimenting with alternatives.

But scarcity forecasts have underestimated the impact of improvements in technology, mostly driven by price changes, of which shale extraction has been the most recent and dramatic.

And we will have cooked the planet through global warming long before we run out of fossil fuels.

“No mineral, including oil, will ever be exhausted,” wrote the late Morris Adelman, an economist at the Massachusetts Institute of Technology (“Genie out of the bottle”, 1995). “If and when the cost of finding and extraction goes above the price consumers are willing to pay, the industry will begin to disappear.” And as former Saudi oil minister Zaki Yamani observed in 2000:

“Oil will be left in the ground. The Stone Age came to an end, not because we had a lack of stones, and the oil age will come to an end not because we have a lack of oil.” The oil age, too, will end, if and when it is replaced by a superior energy source - just as mainframe computers, buggy whips and typewriters have all been largely superseded. But it won’t end for lack of oil. Proved oil reserves increased by 6.4 billion barrels (19.5 percent) in 2017 compared with the previous year, according to the US Energy Information Administration (“U.S. crude oil and natural gas proved reserves”, EIA, Nov. 29).

These are estimated volumes of oil that analysis of geologic and engineering data demonstrates with reasonable certainty are recoverable under existing economic and operating conditions. Estimates change in response to new field discoveries, greater understanding of existing fields, technology and changes in prices and costs, as well as the amount produced. — Reuters