How much oil does the World have and need?

Organization of Petroleum Exporting Countries (OPEC)

There is a fear of vulnerability in our way of life. There is a fear that world oil dependence will soon lead to the depletion of petroleum. Less spoken anxiety is the vulnerability that we are purchasing oil from countries with whom we don’t have shared values and from some countries that we think are harboring true enemies.

The Organization of Petroleum Exporting Countries (OPEC), founded in September 1960, by Iran, Iraq, Kuwait, Saudi Arabia, and Venezuela. Today OPEC is comprised of eleven members, including Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, the United Arab Emirates, and Venezuela. Collectively, they own about 75 percent of the world oil and supply almost 40 percent of the world’s consumption.

OPEC has members from the Middle East, Africa (Libya and Nigeria), Asia/Oceania (Indonesia), and Central/South America (Venezuela).

There are many classifications of oil reserves. The Securities & Exchange Commission (SEC) reports provable oil reserves as “estimated quantities of crude oil, natural gas, and natural gas liquid which geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.”

Oil is a finite reserve. Depending on who you talk to and the algorithm they use, you will get a broad range of answers to the question of how limited oil is. When the government talks about oil peaking out they are talking about provable oil reserves. There will still be oil; it will just be harder and more expensive to access.

For example, the oil we purchase today is largely from coastal areas. The coastal zone oil allows us cheaper oil than drilling in the Alaskan National Wildlife Reserves and transporting it through a pipeline. Coastal oil is easier to locate, easier to set up for safe pumping, and easier to transport to a refinery. Drilling in the Alaskan National Wildlife Reserves would require new roads or the expensive airlifting in of pumping equipment, isolating that equipment from ecologically fragile areas, and pumping it through a pipeline that would be fraught with public controversy and likely costly to install.

The Energy Information Administration (EIA) reports that there are 1,213,112 barrels of provable reserves. In Chart 1, we see that the Middle East owns 56 percent of world oil, with Saudi Arabia making up 21.5 percent of the total world oil. That is the number most people quote. In Chart 2, we see that of the 56 percent that the Middle East owns, Saudi Arabia owns 39 percent of the provable oil reserves.

According to Dave Costello, an EIA analyst, EIA has calculated that the world consumes 79.5 million barrels of oil a day. The United States consumes the most oil of any one country. Chart 3 shows us that the United States has the largest consumption of oil in any major segments of countries.

The EIA has an acronym OECD: Organization for Economic Cooperation and Development. The countries included in the OECD are Australia, Austria, Belgium, Canada, the Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, South Korea, Spain, Sweden, Switzerland, Turkey, the United Kingdom, and the United States.

The Former Soviet Union includes Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine, and Uzbekistan.

One interesting note is that the EIA has forecasted that China’s consumption will increase by a whopping 6.6 percent between 2003 and 2004, the most of any country. The United States is predicted to change only 1.7 percent for the respective year.

While the chief concern about oil is availability, the second is the price. Anxiety over the Middle East problems and the surge in Chinas, Indias, and other country’s demand for oil has created the current spike in petroleum. The EIA recorded oil usage for China in 2003 at 5.5 million barrels per day. They estimate that China will be using 6 million barrels per day in 2004 and 6.5 million barrels per day in 2005.

According to the Department of Energy (DOE) and American Petroleum Institute (API) in inflation-adjusted 2004-dollar terms, today’s price of oil is low compared to the historical record of pump prices over the last 86 years.

In fact, gasoline prices are 25 percent lower than the inflation-adjusted 1981 high of $2.79 per gallon. Between 1981 and now, the real cost of motor gasoline to consumers has fallen by $0.70 per gallon. This decline can be attributed to lower crude oil costs. Inflation-adjusted crude oil costs have decreased by $0.83 per gallon from $1.73 per gallon in 1981 to $0.90 per gallon by May 2004.

The DOE goes on to say that the most significant increase in gas has been in terms of taxes. In 1981, the combined federal and state taxes were 30 cents per gallon. In 2004, they were 42.7 cents per gallon.

The oil will remain the dominant power source for transportation for decades. How long is the source of the discussion by many an academic?

Options for the Oil future:

Oil does not have to run out to disappear. Years ago Boris Yeltsin sent a fax to NATO saying that the Soviet Union no longer existed. While it is implausible to think that the Middle East could stop selling their oil, it is not impossible.

Before anyone says something about crying wolf, remember, at the end of the story the wolf came. Now is the time to start looking for ways to wean the United States from its dependence on oil. What are some of the alternatives today and in the near future? Hybrids are popular right now, but what will we do with all the batteries as they die?

Hybrids were made popular by Toyota, yet neither the Japanese market nor the Europeans have warmed to hybrids. The reason could be the size of the car in America vs. other countries. According to the Power Information Network, an affiliate of J.D. Power, there were 47,525 hybrids purchased in the U.S. in 2003.

There is also the current debate of whether the consumer is receiving the stated MPG at which they purchased the hybrid. The EPA reports that the Toyota Prius gets 60mpg city, but is falling short of that, getting numbers like 45-50mpg. 45mpg is great, but diesel can get that and works on the old internal combustion engine. The new hybrids coming out this year are; the Ford Escape, Lexus RX400, and the Toyota Highlander, Chevy Silverado, GMC Sierra, Honda Accord, Lexus RX330.

Diesel is making its way back into the U.S., but it is slow going. Allen Schaeffer, Executive Director, Diesel Technology Forum, admit’s, “it is up to the American public if diesel is to make a comeback in the U.S. In 2003 there were 40,000 diesel vehicles sold in the U.S., 23,426 of them were Volkswagens.

Volkswagen Corporation calculated the diesel fuel usage to be equal to 8,267,638 gallons of diesel for the entire year, a drop in the bucket when we’re using 79.5 million barrels a day of gasoline. This year four more diesel vehicles, Mercedes-Benz E320 CDI, Volkswagen Passat TDI, Jeep Liberty (CDI) and the Volkswagen Touareg V-10 TDI will make it to the U.S. market.” But these cars are not sold in every state due to their inability to meet current pollution in California and other more stringent regional requirements, and won’t be sold in those states until 2007 when new low sulfur fuels become nationally mandated and available.

Schaeffer also understands that there is a diesel education for Americans. “In the 70s diesel was stinky, and the car was noisy. Today, diesel vehicles burn on an average 30 percent less fuel and produce 25 percent less carbon monoxide emissions than petrol engines. The noise has been reduced by 90 percent from motor vehicles since 1970.” In 2007, there is a mandate to clean up the diesel fuel itself, which will allow more European engines to be brought into America.

The global picture is noteworthy. The European Automobile Manufacturers Association reported that in 1993 types of diesel made up 15 percent of the European market. Ten years later diesel is 42 percent of the European market. According to John Cogan, EIA analyst, gas has gone down 10 percent in Western Europe for about the same period, while distillates (1), which includes diesel, has gone up 10 percent.

Fuel cell technology is seen by the oil industry as a means to both energy efficiency and environmental improvement. Fuel cell cars will emit very few pollutants because the cells themselves produce only water and heat. They are supposed to get twice the fuel economy of today’s internal combustion engines. At the Paris Auto Show last year, General Motors displayed a prototype that ran on hydrogen-powered fuel cells. Shell Hydrogen and General Motors have a hydrogen fuel cell test going on right now in the Washington D.C. area. And AC Transit in Alameda County, California, and several other transit authorities are testing hydrogen fuel cells in buses on regular transit lines.

George Smalley, Director of Communications, Shell Oil, Hydrogen cannot say how long it will be before hydrogen makes its debut. “We have storage and dispensing units in Reykjavík Iceland, Amsterdam, Japan, and Luxembourg. We are years and billions of dollars away from infrastructure. There are challenges and hurdles with each technology, including being able to amortize it profitably.”

The government is matching funds up to $350,000,000 for research and development to Ford, General Motors, and Daimler-Chrysler under a program called Freedom Car. The “CAR” in FreedomCAR stands for Cooperative Automotive Research between the U.S. Department of Energy, the U.S. Council for Automotive Research, and the energy industry. According to Kimberly Hippler, General Motors, Freedom car is a matching program that creates a public-private partnership to develop technologies in the hydrogen-powered world. The goal is;

Freedom from petroleum dependence;
Freedom from pollutant emissions;

Freedom for Americans to choose the kind of vehicle they want to drive, and to drive where they want, when they want; and
Freedom to obtain fuel affordably and conveniently. There are considerations with hydrogen, such as creating an infrastructure with all the necessary codes and standards. Another is safety for the environment. Not in the cleanliness – they produce no pollution – but in distribution, storage, and manufacture of hydrogen.

A large part of the decision to use internal combustion improvements, E85FFV (Ethanol-corn), hybrids, diesel or hydrogen, hy-wire (Hydrogen and electrical wire) will be based on which power systems can be brought to market profitably.

(1)Distillates are also called hydrocarbons or petrochemicals, refer to a broad range of compounds that are extracted by distillation during the refining Using gas and distillates were the most constant comparison for this purpose.

Sources: EIA: latest data available from EIA databases supporting the following reports: International Petroleum Monthly, DOE/EIA-0520; Organization for Economic Cooperation and Development, Annual, and Monthly Oil Statistics Database.