POLICY FORUM

S C I E N C E A N D I N D U S T RY dictions in the last 20 years of an imminent

crisis in oil availability that subsequently
had to be revised. The most eminent among
Oil: Never Cry Wolf—Why the them is C. Campbell, who predicted that
1989 was the year of “peak” production

Petroleum Age Is Far from over
fter World War I, the
(6). The estimates have been increasing
steadily (see table, next page).
Before looking at the real-world situa-
Leonardo Maugeri tion in more depth, it is necessary to clear
up some points, beginning
4 with the distinction between

A United States was

shaken by predictions
of the exhaustion of domestic
3
Peak production
(or “midpoint depletion” “resource” and “reserve.”
The former indicates the
overall stock of a mineral in
Production (Bbl/year)

oil. Even the head of the U.S. physical terms, without any
Geological Survey (USGS)— associated economic value
among many others—deliv- and/or estimation of its likeli-

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ered a verdict of gloom in 2 hood of being extracted. In
1919: The country would run other words, there may be
out of oil within 9 years! (1) large quantities that can nev-
Facing mounting hysteria, er be used because of the
President Coolidge set up the 1 high cost or the impossibility
Federal Oil Conservation Cumulative production or of recovery, as in the case of
ultimate recoverable resources
Board in 1924, to draft legis- (URR)
the gold dispersed in the
lation to preserve national re- 0
oceans. The concept of “re-
sources. After the conversion 1850 1875 1900 1925 1950 1975 2000 2025 2050 serves”—like that of “recov-
of Great Britain’s naval fleet Years erable resources”—involves
from coal to oil in 1914, the 9
an economic assessment of
UK also feared that it would The Hubbert curve (United States). Bbl, billion (10 ) barrels. the possibility of producing a
be vulnerable to oil shortages and moved to to follow a normal distribution and assumes part of the overall resources. In the oil sec-
secure its grip on the Persian Gulf. These a bell-shaped curve (see figure above). tor, there are additional definitions—the
cycles of hysteria followed by new bonan- Starting from zero, production grows most important being that of “proven re-
zas have continued to the present. Thus, it over time until it peaks when half of the re- serves,” which include only those that can
is not surprising that a new wave of “oil coverable resources have been extracted be economically produced and marketed at
doomsters” predicting imminent petroleum (“midpoint depletion”). Then, production the present time according to existing tech-
scarcity has gained momentum (2–4). irreversibly declines at the same rate at nologies and demand. Nearly all of the es-
The worst effect of this recurring oil which it grew. The area under the curve timates of the world’s oil URR, including
panic is that it has driven Western political shows the cumulative production of an oil those by oil doomsters, do not take into ac-
circles toward oil imperialism and attempts field or the “ultimate recoverable re- count the so-called “nonconventional
to assert direct or indirect control over oil- sources” (URR) it holds and their life-span. oils”—such as Canadian tar-sands and
producing regions. Yet the world is not Accordingly, to forecast Earth’s URR, Venezuelan and Russian heavy oils—even
running out of oil, and catastrophic views one needs to process worldwide production though the availability of these resources is
fail to take into account the complex reali- and discovery trends and geological data. huge and the costs of extraction falling.
ty that will allow reliance on abundant sup- In 1956, Hubbert accurately predicted the Although hydrocarbon resources are ir-
plies for years to come. peak oil production point of the U.S. lower refutably finite, no one knows just how fi-
The current model of oil doomsters is 48 states. nite. Oil is trapped in porous subsurface
derived from K. M. Hubbert (5). The model The Hubbert curves do not delineate the rocks, which makes it difficult to estimate
is conceptually simple, but based on several complex and dynamic nature of oil produc- how much oil there is and how much can
assumptions. The first is that the geological tion and reserves in the world, because they be effectively extracted. Some areas are
structure of our planet is well known and are the product of a static model that puts still relatively unexplored or have been
thoroughly explored, so that discovery of an unjustifiable faith in geology and does poorly analyzed. Moreover, knowledge of
unknown oil fields is highly improbable. not consider technology and cost/price in-ground oil resources increases dramati-
Second, to resolve problems connected with functions. The model’s success in predict- cally as an oil reservoir is exploited.
erratic distribution and production from ing U.S. peak production merely reflected For example, the Kern River field was
thousands of oil fields and uncertainty of the peculiar nature of this area, which is the discovered in California in 1899.
future discoveries, production is assumed to most intensively explored and exploited in Calculations in 1942 suggested that 54
follow the “Central Limit Theorem” from the world. Elsewhere, the pattern of pro- million barrels remained. However, in
statistics. This theorem states that the sum duction is not rendered by a bell curve but 1942 “…after [43] years of depletion, ‘re-
of a large number of erratic variables tends is marked by large discontinuities (see fig- maining’ reserves were 54 million barrels.
ure on next page). But in the next [44] years, it produced not
The author is group senior vice president, Corporate Using different versions of the Hubbert 54 but 736 million barrels, and it had an-
Strategies, Eni Spa, Rome, Italy. model, several geologists have made pre- other 970 million barrels ‘remaining’ in

1114 21 MAY 2004 VOL 304 SCIENCE www.sciencemag.org

 POLICY FORUM
1986. The field had not changed, but Nevertheless, international
knowledge had….” (7). This is but one of SELECTED UPWARD REVISIONS IN public oil companies have faced
hundreds of cases reported in oil-related PETROLEUM URR ESTIMATES two sets of limits to their expan-
literature that underscore the inherently dy- Petroleum URR (Bbl) (year) sion in the last 20 years. The first
namic nature of oil reserves. As Klett and is inaccessibility to foreign in-
Hubbert Campbell USGS
Schmoker have recently demonstrated, vestment in the largest and cheap-
from 1981 to 1996 the estimated volume of 1350 (1969) 1578 (1989) 1796 (1987) est reserves—those in the Persian
oil in 186 well-known giant fields in the 2000 (1973) 1650 (1990) 2079 (1991) Gulf. Second are the demands of
world [>0.5 billion (109) barrels (Bbl) of 1750 (1995) 2272 (1994) financial markets, which for
oil, discovered before 1981] increased years have insisted that compa-
1800 (1996) 3021 (2000)
from 617 to 777 Bbl without new discover- nies provide unrealistic, short-
ies (8). Indeed, many studies have proved 1950 (2002) term financial returns that are in-
the phenomenon of “reserve growth”—i.e., consistent with the long-term na-
that “additions to proven recoverable vol- ture of oil investments. This has
umes are usually greater than subtractions” ing from 20 years in 1948 to 35 years in compelled private operators to reject op-
(8). This occurs because of four fundamen- 1972 and reaching about 40 years in 2003. portunities that would normally be deemed
tal elements: technology, price, political Today, all major sources estimate that economically worthwhile. This financial
decisions, and better knowledge of existing proven world oil reserves exceed 1 trillion pressure partly explains recent proven re-
fields—the last of these being possible on- (1012) barrels, while yearly consumption serve downgrading by some oil companies,
ly through effective and intensive drilling. is about 28 billion barrels (10–13). starting with the amazing cuts announced

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We anticipate that this trend will contin- Overall, the world retains more than 3 tril- by the “supergiant” Shell Group (15).
ue. Consider, for example, the most recently lion barrels of recoverable oil resources Indeed, this Anglo-Dutch oil company has
discovered oil frontier in the world, (14). not lost its resources. This picture has noth-
Kazakhstan, and its major finding—the gi- Critics could note that new oil discov- ing to do with physical scarcity of oil.
gantic Kashagan field. Geological estimates eries are only replacing one-fourth of The Age of Coal began when declining
about the general area around Kashagan (the what the world consumes every year (fol- supplies of wood in Great Britain caused
Kazakh North Caspian Sea Shelf) have ex- lowing a declining trend that began in the its price to climb. Two centuries later, oil
isted for decades, but they only indicated the mid-1960s), and that increases in re- took the place of coal as “the king of ener-
possibility of hydrocarbon deposits. After serves largely derive from upward revi- gy sources” because of its convenience and
the first advanced geological appraisal was sions of existing stock. However, the real its high flexibility in many applications,
conducted by international oil companies in issue is that neither major producing but coal was neither exhausted nor scarce.
the second half of the 1990s, the area was countries nor publicly traded oil compa- Oil substitution is simply a matter of cost
deemed to hold between 2 and 4 Bbl. In nies are keen to invest money in substan- and public needs, not of scarcity. To “cry
2002, after completion of only two explo- tial exploration campaigns. The countries wolf ” over the availability of oil has the
ration and two appraisal wells in the richest in oil have minimized their oil in- sole effect of perpetuating a misguided ob-
Kashagan field, estimates were officially vestments during the last 20 years, main- session with oil security and control that is
raised to 7 to 9 Bbl of producible reserves. ly for fear of creating a permanent excess already rooted in Western public opinion—
In February 2004, after four more explo- capacity such as that which provoked the an obsession that historically has invariably
ration wells in the area, they were raised crisis in 1986 (when oil prices plummet- led to bad political decisions.
again to 13 Bbl. This is only the beginning, ed to below $10/bbl). In fact, countries
because this area spans over 5500 sq km, such as Saudi Arabia or Iraq (which to- References and Notes
and six exploration wells are a modest indi- gether hold about 35% of the world’s 1. D. Yergin, The Prize: The Epic Quest for Oil, Money,
and Power (Simon & Schuster, New York, 1991), p.
cator of future potential. Moreover, there are proven reserves of oil) produce petroleum 194.
many other oil fields yet to be explored in only from a few old fields, although they 2. “The end of the oil age,” The Economist, 23 October
this area (including Kairan, Aktote, and have discovered but not developed more 2003, pp. 11, 61–63.
Kalamkas), that have a geological structure than 50 new fields each. Moreover, in 3. D. Goodstein, Out of Gas—The End of the Age of Oil
(Norton, New York, 2004).
similar to that of Kashagan. countries closed to foreign investments, 4. Deutsche Bank, “Hubbert’s pique,” Global Energy
Thanks to new exploration, drilling, the technologies and techniques used are, Wire, June 2003.
and recovery technology, the worldwide in most cases, obsolete. 5. K. M. Hubbert, “Nuclear energy and the fossil fuels,” in
Drilling and Production Practice series (American
finding and development cost Petroleum Institute, Washington, DC, 1956).
per barrel of oil equivalent 7 6. C. Campbell, Oil Price Leap in the Early Nineties
(boe) has dramatically declined (Noroil, Kingston-upon-Thames, UK, 1989).
6 7. M. Adelman, The Genie Out of the Bottle (MIT Press,
over the last 20 years, from an
Production (Bbl/year)

Cambridge, MA, 1995).

average of about $21 in 1979–81
to under $6 in 1997–99 (in 2001
dollars) (9). At the same time,
the recovery rate from world
oil fields has increased from
about 22% in 1980 to 35% to-
day. All these factors partly ex-
plain why the life-index of
world reserves (gauged as the
ratio between proven oil re-
serves and current production)
has constantly improved, pass- Historical behavior of oil production in Egypt (16 ).
5 8. T. R. Klett, J. W. Schmoker, AAPG Memoir No. 78, 107
(2003).
4 9. International Energy Agency, World Energy Outlook
2001 Insights (Organization for Economic Cooperation
3 and Development/IEA, Paris, France, 2001).
10. Oil Gas J. (December 2002).
2 11. Eni—World Oil and Gas Review (May 2003).
12. BP’s Statistical Review of World Energy 2003 (British
Petroleum, London, June 2003).
1
13. World Oil (August 2003).
0 14. USGS, World Petroleum Assessment 2000 (USGS,
1960 1967 1972 1977 1982 1987 1992 1997 2002 Washington, DC, 2000).
15. PIW (Petrol. Intell. Wkly.), 19 January 2004.
Years
16. M.A.Adelman, M. C. Lynch, Natural Gas Supply to 2100
(International Gas Union, Hoersholm, Denmark, 2002).

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