The Smith School of Enterprise and the Environment (Oxford University) has today published a paper stating that capacity to meet projected future oil demand is at a tipping point and that we need to accelerate the development of alternative energy fuel resources in order to ensure energy security and reduce emissions.
The Status of Conventional Oil Reserves – Hype or Cause for Concern? published in the journal Energy Policy concludes that the age of cheap oil has now ended as demand starts to outstrip supply as we head towards the middle of the decade. The report also suggests that the current oil reserve estimates should be downgraded from between 1150-1350 billion barrels to between 850-900 billion barrels, based on recent research. But how can potential oil shortages be mitigated?
Dr Oliver Inderwildi, Head of the Low Carbon Mobility centre at the Smith School, said:
“The common belief that alternative fuels such as biofuels could mitigate oil supply shortages and eventually replace fossil fuels is a pie in the sky. There is not sufficient land to cater for both food and fuel demand. Instead of relying on those silver bullet solutions, we have to make better use of the remaining resources by improving energy efficiency. Alternative such as a hydrogen economy and electric transportation are not mature and will only play a major role in the medium to long term.”
Nick Owen of the Smith School of Enterprise and the Environment added:
“Significant oil supply challenges will be compounded in the near future by rising demand and strengthening environmental policy. Mitigating the oil crunch without using lower grade resources such as tar sands is the key to maintaining energy stability and a low carbon future.”
The Smith School paper also highlights that in the past, political and financial objectives have led to misreporting of oil reserves, which has led to contradictory estimates of oil reserve data available in the public domain.
Sir David King, Founding Director of the Smith School, commented:
“We have to face up to a future of oil uncertainty much like the global economic uncertainty we have faced during the past two years. This challenge will have a longer term effect on our economies unless swift action is taken by governments and business. We all recognise that oil is a finite resource. We need to look at other low carbon alternatives and make the necessary funding available for research, development and deployment today if we are to mitigate the tipping point.
The report also raises the worrying issue that additional demand for oil could be met by non-conventional methods, such as the extraction of oil from Canada’s tar sands. However, these methods have a far higher carbon output than conventional drilling, and have been described as having a double impact on emissions owing to the emissions produced during extraction as well as during usage.
The UK Telegraph ran a story on the report March 23:
The world’s oil reserves have been exaggerated by up to a third, according to Sir David King, the Government’s former chief scientist, who has warned of shortages and price spikes within years.
The scientist and researchers from Oxford University argue that official figures are inflated because member countries of the oil cartel, OPEC, over-reported reserves in the 1980s when competing for global market share.
Their new research argues that estimates of conventional reserves should be downgraded from 1,150bn to 1,350bn barrels to between 850bn and 900bn barrels and claims that demand may outstrip supply as early as 2014. The researchers claim it is an open secret that OPEC is likely to have inflated its reserves, but that the International Energy Agency (IEA), BP, the Energy Information Administration and World Oil do not take this into account in their statistics. …
The report is available online (for a fee). See:
Nick A. Owen, Oliver R. Inderwildi and David A. Kinga
All of the Low Carbon Mobility Centre, Smith School of Enterprise and the Environment, University of Oxford, Oxford, United Kingdom
The status of world oil reserves is a contentious issue, polarised between advocates of peak oil who believe production will soon decline, and major oil companies that say there is enough oil to last for decades.
In reality, much of the disagreement can be resolved through clear definition of the grade, type, and reporting framework used to estimate oil reserve volumes. While there is certainly vast amounts of fossil fuel resources left in the ground, the volume of oil that can be commercially exploited at prices the global economy has become accustomed to is limited and will soon decline. The result is that oil may soon shift from a demand-led market to a supply constrained market.
The capacity to meet the services provided by future liquid fuel demand is contingent upon the rapid and immediate diversification of the liquid fuel mix, the transition to alternative energy carriers where appropriate, and demand side measures such as behavioural change and adaptation. The successful transition to a poly-fuel economy will also be judged on the adequate mitigation of environmental and social costs.
2. Literature survey
3. Sources of ambiguity
3.1. A question of cost: resources vs reserves
3.2. A question of chance: reserves vs production
3.3. A question of grade: conventional reserves vs unconventional resources
3.4. Intentional mis-reporting and withheld information
3.5. Caution: reserve–production ratio (R/P)
3.6. Caution: contradictory figures
4. Global oil reserves
4.1. Review of corrected 2P discovery data
4.2. Published reserves less acknowledged error
4.3. Liquid fuels demand and production forecast
5. Oil price and future resources
6. Key conclusions