Predicting the unknown
Thursday, July 24th, 2008 By James NesbittYesterday, the U.S. Geological Survey released the first public assessment of undiscovered, recoverable oil reserves north of the Arctic Circle. They estimate the region to contain about 90 billion barrels of recoverable oil, which by USGS calculations accounts for 13% of undiscovered oil in the world. The USGS leaves room for even more discoveries:
Exploration for petroleum has already resulted in the discovery of more than 400 oil and gas fields north of the Arctic Circle. These fields account for approximately 40 billion barrels of oil, more than 1,100 trillion cubic feet of gas, and 8.5 billion barrels of natural gas liquids. Nevertheless, the Arctic, especially offshore, is essentially unexplored with respect to petroleum.
This report shows yet again a trend of human knowledge not limited simply to oil exploration: the information available to us and our understanding of it is constantly increasing. While we have always been concerned by the fact that our supply of oil is limited (and indeed it is), we do not know the size of that limited supply. OPEC has released yearly data on our known world reserves and world consumption of oil since its creation in 1960, and it shows an important trend: as our consumption of oil increases, the amount of reserves we discover increases at an even greater rate. As the graph below demonstrates, the amount of oil we consumed in 1960 as a percentage of the reserves known in that same year was higher than it was in 2007. (Click on image to enlarge.)
Yes, we have a limited supply of oil, but as we discover year after year, we are not even close to reaching that limit. Settling for less efficient energy technologies to avert a crisis not in existence is a foolish policy and limits our growth and economic health. The market will provide the incentives for the most efficient avenues of change should the need to adopt different sources of energy ever arise.
