In a sense, we are always running out of oil. Because oil is a limited resource, each barrel we produce brings us one step closer to the upper limit of oil which can be extracted.
However, we're also running into oil, discovering new reserves and developing technologies which will help us extract more from known fields.
More important, it's unlikely that our demand will ever exceed or use up our supply. As supplies grow scarce, oil prices will begin to rise, and people will turn to a more abundant, less expensive alternative. In the near term, with oil products both economical and practical, alternatives will find it hard to compete.
The shift, when it comes, won't happen overnight, because oil supplies -- both conventional and unconventional -- are substantial. Moreover, the change is likely to be as painless a transition as when people switched from wood to coal to heat their homes or substituted computers for typewriters to prepare letters and documents.
That's why government subsidies and mandates intended to help the nation move to approved alternatives -- to "anticipate change" -- are unnecessary. Government isn't needed to do what the market can and will do better and more cheaply.World reserves are substantial
World reserves are greater now than ever before. Even if we never discover another drop of oil, current reserves will be able to sustain the current rate of oil consumption for another half-century.
In 1993, the world's proved reserves were estimated to be just under a trillion barrels -- about a 45-year supply of oil, based on current rates of consumption. This estimate represents a working inventory of the world's supply at a single moment in time.
Taking into account probable future oil discoveries, the U.S. Geological Survey (USGS) estimates that between 1.4 trillion and 2.1 trillion barrels of oil remain to be produced worldwide. This amount of oil would sustain the current rate of consumption between 63 to 95 years.
To be more specific, there is a 95-percent possibility that the world's remaining oil resources could last 63 more years and a 5-percent chance that the world's resources will last another 95 years at recent rates of consumption.
However, any estimate of oil reserves is somewhat uncertain. These predictions are based on current demand for petroleum products. There is no surefire way to predict future demand, although some experts predict that demand for oil will grow somewhere between 1 and 2 percent annually.Technological progress forestalls exhaustion
Our oil supply also depends critically on technology. The amount of resources remaining is fixed, but only in the way that a rubber band is fixed. The world's production capacity can be expanded with better technology.
New exploration techniques are already improving the scope and success of offshore drilling operations, adding to the world's known resources.
For example, in 1965, the petroleum industry's drilling capabilities limited offshore wells to waters less than 300 feet deep. Today, the industry drills for oil in waters as deep as 3,000 feet.
One new technology is three-dimensional seismic analysis. Using traditional seismic analysis, the industry successfully completed just over 40 percent of new wells. With 3-D seismic analysis, that success rate has risen to over 70 percent.
Such advances are crucial to the lifespan of the world's oil supply, because every 1 percent increase in the industry's average recovery rate can add between 60 billion and 80 billion barrels to resource estimates. That's enough to last three to four years, based on current rates of consumption.
And, if economically feasible ways to extract and refine unconventional sources of oil are found, our oil supply could be extended for hundreds of years. A large part of the world's remaining resources is found in the form of oil shales, heavy and extra heavy oils and bitumins. These unconventional resources are equal in volume to ten times the amount of recoverable conventional oil resources that remain.Challenges are ahead
The good news is that world oil resources are abundant, and, if anything, are likely to become more so with new discoveries and changes in technology. However, major new investment will be needed to translate this potential into production -- and, in most of the world's largest producing countries, there has been stagnation or deterioration in the investment climate. That's because, at home as well as abroad, barriers stand in the way of full resource extraction.
At home, the area that has been called "the best single opportunity to increase significantly domestic oil production" by the U.S. Department of the Interior -- the coastal plain of the Arctic National Wildlife Refuge -- is closed to drilling, despite the fact that the department found that there is a 46-percent chance of discovering economically recoverable oil, possibly totaling several billion barrels.
And internationally, institutional and other barriers threaten the realization of full production potential. For example, in Russia, ambiguous property rights and political turmoil add risks. Oil developed in the newly independent states of the former Soviet Union must be transported through volatile or politically hostile territory in order to reach its destination.
Political volatility also remains an obstacle to new investment in the Middle East. Territorial disputes, shifting alliances and issues of succession cloud the future of investments in this
crucial region.
9/12/96 (f) BB