The Next Oil Price Shock: The World's Remaining Oil and Its Depletion

Abstract

The Oil industry is in transition between growth and decline as the world approaches the Midpoint of the depletion of its conventional oil. Assessing the world's oil endowment is bedevilled by problems of definition to distinguish conventional from unconventional oil and to specify the precise nature of reserves. The database in the public domain is weak with important reported reserve numbers having a “political” content. New methods have been developed to estimate the ultimate recovery of conventional oil, and hence the undiscovered potential. That in turn gives the amount remaining, (here 932 Gb) which is unevenly distributed with about half in just five Middle East countries. Applying Depletion Rates (percentage of the remaining produced each year) to the Remaining allows construction of a depletion model under alternative scenarios of world demand, with a few well-endowed countries in a swing role. The model suggests that the scene is set for another oil price shock as these countries gain an increased share of the market, which will in turn herald a deepening long-term shortfall in supply due to resource constraints. It may be an historical turning point with colossal political and economic implications, imposing a more sustainable lifestyle on mankind.