In my last post I wrote a bit about Canadian oil production vs. our proven reserves and gave some projections on how long our reserves might last. Our government says that our oil reserves will last 200 years, however I showed that that is subject to the fragile assumption that there will be no increase in production during that time. The post further shows that over the last 30 years Canadian oil production has averaged about 2.65% growth per year, so using that as a baseline for future oil growth the length of time until Canadian reserves run dry is about 70 years.
This post will blow all that out of the water and show that 70 years is much longer than a more realistic estimate.
I picked up some data from the CIA World Factbook on global oil consumption and proven reserves. From this we can see that world consumption is about 36.75 billion barrels of oil per year, and the total proven reserves is about 1.48 trillion barrels. If we do the simple calculation of just dividing reserves by consumption we get just over 40 years. This means that if oil consumption does not grow any more, we will run out of all the oil we have proven to exist in 2051. This seems like a long time away, however it is within one human lifetime: I will turn 65 in 2051.
That is assuming that there will be no growth in consumption during those 40 years. Looking at this page the average growth rate in oil consumption is 1.18% per year (using a geometric mean since this is a growth rate). If we predict that oil consumption will continue to rise at this rate, we will run out of our reserves a bit sooner: just under 33 years from now, sometime in 2044. This is less than half of our prediction from the Canadian example, and one sixth of the Canadian government's prediction of how long our oil supplies will last.
How is it that the amount of time here is so much smaller than in the Canadian case? Why is it that the world oil reserves will somehow be drained sooner than the Canadian ones, a logical impossibility? The main culprit here is our assumption that Canadian oil production will continue to grow at 2.65% and not something higher. If you look at global oil production by country you can see that four countries (Russia, the USA, China and Iran) all have much higher production than Canada but all have lower proven reserves; they will run out of their oil far sooner than we will. When that happens, consumers around the world who want oil will have to turn to somebody else. Will our 2.65% per year increase in production be able to satisfy those consumers once other sources start running out?
As in the last post, I am stressing that this is not driven by ideology. There is no liberal or conservative bias here, it is just numbers from reasonably good sources and simple, widely known mathematics. You can repeat this analysis yourself and see that you will come to the same numbers. The R code for this one is available here, you'll need the data that I listed above and then convert the CIA files from fixed-width format to CSV format.