According to a great blogging site I follow, it’s a good idea to update and recycle old posts around the holidays. So it dawned on me that I had a little gold mine stashed away in the form of an old blog I had a few years ago dealing with energy and climate. So here are two oldies, but goodies from March of 2011. Much has changed, but not really…
The End of Oil (is closer than you think)
I recently looked at an interesting slide-show on CNBC.com about the world’s 15 biggest oil producers. They use the November 2010 production data from the U.S. Energy Information Agency. It occurred to me that I could take the numbers given for proven reserves and divide that by daily production to give days and years of remaining production from existing reserves. I entered it into a spreadsheet and that info is below. The average years of production remaining for the top 15 producers is 57.7. This number is not the peak, but the average for the END of production. Of course many factors are in play, mostly negative. Including huge demand increases from China, India and other rapidly developing nations. The peak of discovery for significant new oil fields was 1967 or thereabouts, so I don’t think there are many significant new discoveries in the works. Better recovery techniques will help some, but not enough given the projected demand increases. Further, the given “proven reserves” might be considered rosy by some. Mexico has abused their oil fields by over-pumping and will probably never extract their projected proven reserves. Also, Saudi Arabia’s oil fields are much more mature than they let on, making their projections also questionable.
The gist is that peak oil is either here, or close at hand, and the end of production is much closer than people generally believe. This means that oil will become increasingly expensive, and because the world economy depends on oil, this will eventually lead to slower economic growth, declining food production, increasing armed conflicts over resources, and a host of other consequences. Not least of which would be the utterly disastrous environmental results of burning every last drop of available oil. Of course these outcomes also depend on how fast alternative energy sources are adopted, improvements in efficiency and conservation, and reduction of consumption, especially in the developed nations.
If you invest in stocks or commodities just about anything connected with oil and energy production is where the money is for the foreseeable future. Personally I like to hold oil drilling companies, which are cheaper than buying oil company stocks. I also hold several alternative energy companies as well. Options in oil and alternative producers could be a good bet too. Of course these are my opinions, as they used to say on ye old internet, YMMV, your milage may vary.
50 Years of Oil Left…
Looks like somebody agrees with me.*
(* Although this video is a few years old, it is still a VERY accurate summary of the economics of energy.)
Fast Forward to December 2014 …
Much of the info discussed above is still correct, HOWEVER, U.S. production has gone way up thanks to the boom in fracking of tight shale oil formations. U.S. Daily Production is now: 12.36 million barrels per day, up from 8.85 mbpd. U.S. proven reserves are now estimated at: 30.53 billion barrels, up from 19.2 bb. Data from U.S. Energy Information Agency.) All of this leads us to some important questions…
- What the heck is “fracking” anyhow?
- What does the increase in U.S. production mean for the future of oil?
- How does Saudi Arabia and the current drop in oil prices play into this?
- What happens if we burn all that oil?
- What can I do to be ready for when the oil runs out?
For answers to these questions, and an updated spreadsheet showing how much time is left… please stay tuned for part 2. In the meantime, feel free to share your thoughts about these questions below.
Thank you, and a happy and productive 2015 to you and yours.
-T. Goodwell
P.S. The original post talks about investing in oil companies. Due to the extremely negative impacts of the oil industry on the environment, I have since divested my investments of any oil related companies. The divestment movement is growing and gathering steam (I sense another post topic in the making!) So I invite you to join me and the Rockefellers and divest from oil.