That more than 60 per cent of the world's proved oil reserves are in the Middle East, a region wracked by conflict, is a constant source of anxiety for nations that rely on Gulf supplies. In spite of stated efforts to reduce its reliance on Middle East oil, the US has been driven to repeated interventions and support for autocratic regimes to ensure stable energy supplies. -- Financial Times, July 5, 2006, p. 8.
If you were to spin the globe and look for real estate critical to building an American Empire, your first stop would have to be the Persian Gulf. The desert sands of this region hold two of every three barrels of oil in the world -- Iraq's reserves alone are equal, by some estimates, to those of Russia, the United States, China and Mexico combined. -- Robert Dreyfuss, Mother Jones. March-April 2003
The magic number is 112 billion.
That's how many barrels of oil experts say is oozing through Iraq's geology
-- the second largest proven reserves of oil on the planet, just behind Saudi
Arabias. -- New York Times -- Nov. 3, 2002
In the Gulf lie two-thirds of
the world's oil reserves -- Financial
Times (London) -- Dec. 4, 2002
To
begin with, the Middle East does not have two thirds of the world's oil reserves.
The oil reserve estimates cited above all refer to a narrow
category of "proven" oil reserves, not to "every ... barrel
of oil in the world" as Mother Jones magazine would have it. Left,
right and center, everyone who has written about global energy supply has focused on the problem through a single optic.
According to a US Geological Survey report quietly published
in 2000, there is more oil outside the Middle East than inside the region.
Certainly two thirds is not at all accurate -- It's 54 percent of identified
reserves, possibly 40 percent of ultimately recoverable reserves, and possibly
30 percent or less if you include unconventional heavy oil fields.
As Standard Oil executive Wallace Pratt said in 1944, it is
a "fallacy ... [to] cite proved reserves as a measure of available future
supplies." Yet this is exactly what has animated US policy in the Middle East.
The news media nearly always use the proven reserve figures
and omit other categories because the Department of Energy and the oil industry
publish reports that include only "proven" oil reserves -- as if
that is all there is. Most people do not realize that other petroleum geologists
-- most notably those at the USGS -- take a different view.
The current war in Iraq may or may not be "for"
oil, but there is no question that at some level, it is "about"
oil. What if Saudi Arabia, Iraq and the Middle East
are NOT the home of the world's largest oil reserves? What if decades of American
foreign policy are based on a faulty premise? The implications cut deeply
in many directions, but these will be left for the reader.
The point here is to question the premise and get facts on
the table.
The
chart on the next page compares the US
Department of Energy's World Crude Oil and Natural Gas Reserves (created by
the oil industry) and the US Geological Survey's World Petroleum Assessment
and Analysis (created by USGS).
The two approaches are very different. DOE and the oil industry
have relied on narrow estimates of proven reserves which are the basis of
our foreign policy. USGS relies on a more scientific but virtually unknown
estimate. If we rely more on the USGS than the oil industry, it is plain that:
* The Middle East does not have two thirds of the world's
oil -- it has 54 percent of identified reserves, or, if you look at
ultimately recoverable reserves, 39 percent.
* Kuwait -- not Iraq -- has the second largest identified
oil reserves in the world with 99.4 billion barrels, compared to 96.5
for Iraq, according to USGS.
* Saudi Arabia may have one quarter of the world's
identified oil reserves, as the oil industry claims, but it has only
about 16 percent of all ultimately recoverable reserves, according to
the USGS.
In the report that accompanies the reserve estimates, USGS
did not include "unconventional" oil such as Venezuelan heavy crudes. However,
the agency did say that these unconventional sources "are approximately equal
to the Identified Reserves of conventional crude oil accredited to the Middle
East."
In other words, according to the USGS, and employing a conservative
estimate for unconventional oil, the Middle East probably has anywhere from
29 to 35 percent of ultimately recoverable world oil reserves -- not two thirds,
as is commonly claimed by the oil industry.
What
has happened is that "proven" reserves, which reflect the economics
of petroleum development, have been the dominant underlying premise in reserve
information. Other geologically valid categories of oil reserves have been
ignored.
By definition, a proven reserve is one that can be developed
economically. But many oil reserves fall somewhat below a standard index of
affordability and are therefore not counted.
In addition, there are political issues. Most proven reserves
estimates are kept in synch with Organization of Petroleum Exporting Countries
(OPEC) estimates, and OPEC production quotas have long been tied to proven
reserves. As a result, known oil producing areas are
not explored, reserves are not reported, and reported reserves are discounted
for commercial and political reasons.
Of course, proven reserves are the appropriate index for oil
investment (and in some circumstances it may be required under Generally Accepted Accounting Principles). A reserve that is economically extractable is the only kind a
private investor would want. Proven reserves are a burden if you live in a
developing nation with undeveloped oil resources. However,
if you happen to be a citizen of a nation caught up in the life and death
geopolitics of the Middle East, a broader perspective of the geological picture
of world oil reserves would, at the very least, be of some interest.
The net effect of the exclusive emphasis on proven reserves
is to make people believe that the worlds oil future is -- and must always be --
centered in the Middle East.
Nothing could be further from the truth.
Some petroleum economists, aware of the fallacy, make this
analogy.
Let's say a company taking inventory of its taxable stock for tax decides to count only the stock on its store shelves. The stock in
the warehouse will be ignored. You can imagine what the Internal Revenue Service
would have to say about that. *
When it comes to the geology of oil reserves, there is no reason to consider only
only one type of reserve and not the other. There is no reason why journalists or others considering public policy issues should consider what is on the shelves -- the "proven" reserves -- and never consider what
is stored in the"warehouse" of other categories of oil reserves -- identified,
probable, potential, ultimately recoverable and unconventional.
Obviously,
the analogy isn't entirely accurate because oil is not so easily counted.
But the point is that something is fundamentally askew here. å
Next: Comparing USGS and
oil industry reserve estimates
* The Association for the Study of Peak Oil led by Dr. Colin Campbell makes a similar analogy this way:"Understanding [oil] depletion is simple. Think of an Irish pub. The glass starts full and ends empty. There are only so many more drinks to closing time. It's the same with oil. We have to find the bar before we can drink what's in it."
My comment: Think of a street full of Irish pubs where the price keeps going up because the proprieters claim to be running out of beer. You can see for yourself, they say, the shelf is almost empty. The Ministry for Pubs says its worried and gives the pubs a depletion allowance and other tax breaks. Invasions of other nations with beer making capability are seen as necessary, but politicians promise they will eventually ease our dependence on beer and promote cola drinks just as soon as the beer runs out. What you don't know is that there is a huge stockpile of beer barrels in the warehouse across town.)
