It may not be environmentally correct to say so, but with oil prices at $75 per barrel, it is profitable to bring heavy oil into production. Doing this buys the world – at current rates of consumption – nearly another century of supply based on known reserves of heavy oil.
A study by the London based World Energy Council, entitled “The Future for Heavy Oil and Bitumen” includes a chart showing world reserves of conventional oil, as well as world reserves of heavy oil. Their assessment of conventional oil agrees with most other reports, i.e., the world once had about 1.8 trillion barrels of recoverable light crude oil, and about 800 billion of those barrels have already been consumed. At current rates of consumption – approximately 30 billion barrels per year – we’ve got about a 30 year supply of easily recovered crude oil. Add to that the World Energy Council’s estimate of recoverable heavy crude oil, however, and you add another 2.4 trillion barrels of oil to the total. This increases the world’s supply of oil to 110 years!
When people talk of “peak oil” they make several assumptions that should be challenged. First of all, the world appears to be able to afford oil at $75 per barrel, so we need to reset what level of production costs are considered uneconomical. While light crude can be extracted for $10 per barrel or less, with market prices as high – and sustainable – as they are today, heavy crude can be extracted at costs of $30 per barrel and still be profitable to sell.
When the President of Venezuela, Hugo Chavez, petitioned OPEC to recognize the heavy oil reserves in Venezuela’s Orinoco basin, he was simply acknowledging this reality. It’s interesting that news reports portray Chavez’s declarations as an “end to cheap oil,” because the opposite is true. Market forces have allowed us to produce oil economically from heavy crude oil. “Cheap” is relative.
Another interesting study on the availability of heavy crude oil, authored by Bill Kovarik at Radford University in Virginia, entitled “The Oil Reserve Fallacy,” estimates the global reserves of heavy crude at 3.0 trillion barrels. Moreover, this oil is everywhere, from tar sands in Canada to heavy oil in Venezuela, to oil shale in the USA, Brazil, India, and elsewhere.
It is a relatively safe assumption that 100 years from now, we will have perfected methods of generating energy that will not rely on oil – this challenges the notion that oil consumption will increase inexorably. Just as higher oil prices are making production of abundant heavy oil economically viable, they are also pushing develoment of alternative energy. Technology and market forces will always yield new ways to generate energy far faster than conventional sources of energy will be depleted.
Concern about the environmental effects of burning oil are an important, but completely separate issue. Environmental concerns shouldn’t motivate false and misleading statements about supplies of oil running out.