Oil Reserves

The Hon. D.G.E. HOOD (15:46): I would like to draw members' attention to an article that I read this morning. I am a member of a financial subscription service that I receive on the internet from time to time and this one caught my eye and I thought members would be interested in it. I would like to quote directly from the article. Members can have a look at it for themselves if they wish to verify what I am saying. It is portphillippublishing.com.au. They produce a number of publications. It is a reputable organisation which has been around for a long time and employs high quality people. This article is entitled 'Peak oil just got pushed back again' and the article reads as follows:

'Peak oil is upon us.' It's a nice, if somewhat scary, idea. It's the idea that the world is about to run out of oil.

It's also complete junk. The fact is, the world currently has more oil in reserves than anyone could possibly have imagined.

We've explained before how things have shaped up in the oil market in recent years.

For years folks in the US warned about a looming oil crisis. They said it would be the trigger for an economic collapse as either the world ran out of oil or the Middle East effectively held the US to ransom by withholding oil supplies.

Then the oil price began to climb—$40, then $50, then $60, then $100, then $140. You may even remember that during the commodities boom Goldman Sachs' chief commodities analyst forecast an oil price of $200 a barrel.

And yet, what happened? To say that nothing has happened wouldn't be true. But has there been a global energy disaster? No. And why is that?

As we say, the world's proven oil reserves have never been bigger. Here's the proof…

Peak oil keeps getting further away.

Part of the reason for the record high reserves is precisely because the oil price is so high.

It encourages explorers to look for more of the stuff

And with oil at US$100 per barrel, previously uneconomical oil zones become viable. This and the development of new technology have made it possible for oil companies to exploit the vast shale oil and gas resources.

That has been a boon for the US oil industry over the past 10 years. And soon enough it could provide a similar boon in the UK and China as both countries seek to exploit their shale resources.

By the way, we're not saying reserves are higher just for the sake of it. We've got the proof. Yesterday oil giant BP—

on the London Stock Exchange the symbols BP—

released its Statistical Review of World Energy report. The report gives a neat overview of proven—

and I stress the word 'proven'—

oil reserves by country for 1993, 2003, 2012 and 2013.

In 1993 it was a proven fact that we had at least 1,041 billion barrels of oil, that is known reserves. In 2003 that number had increased substantially to 1,334 billion known barrels of oil reserves. In 2012 it had increased substantially again to 1,687 billion known barrels of oil in reserves and in 2013 that number is slightly higher again.

To put that into perspective, the current proven reserves mean that at current supply and demand levels there is around 50 years of proven oil supply [currently in existence].

That assumes explorers don't find one more drop of oil.

What's that we hear? Is that more hollering about Peak Oil?

Before the Peak Oil fanatics get too loud, check out the number for 1993. In that year, world crude oil production was around 60 million barrels per day. At that rate of demand, the oil reserves would have run out in 47 years—in 2040.

Not only has crude oil supply and demand increased since then, eating into the reserves, but reserves have actually increased. That has further extended the lifetime of the world's oil reserves. But that's only half the story…

In 1993 the proven reserves from Canada's Alberta oil sands was only 32.3 billion barrels. Today the proven reserves are something like 167.8 billion barrels.

Then there's Venezuela's Orinoco Belt. In 1993 there weren't any proven reserves. Today the Orinoco Belt has 220.5 billion barrels of proven reserves. That would further extend Venezuela's position as a location of the world's largest oil reserves.

And the best thing is that neither the oil sands nor the Orinoco Belt reserves are in BP's list of total reserves—

that I have just read to you.

Add those reserves to the other proven reserves and it means another 11 years of potential oil production. What's that about Peak Oil and the risk of running out?

It is nonsense they say.

All the talk seems to suggest that oil just has to run out at some time. And maybe it does. We guess there are few things with infinite supply.

But what if that 'some time' is not for another 200, 400 or even more years; what if 'some time' is substantially in the future? All of that is possible. I have run out of time but I make the point that there are plenty of proven oil reserves that exist right now and all this talk of peak oil is just talk.