* BusinessWorld May 3, 2023.
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Are these assumptions correct and realistic? If yes, fine. If no, then all the economic and energy policies leading to net zero are also wrong and distortionary.
To help answer this question, I put together this table and limited the annual data for proven oil and natural gas reserves to 1980, 2000, and 2020. Reserves/Production (R/P) measures how many years the reserves will last if current production by a country (both for domestic use and exports) is constant. So, an oil R/P ratio in 2020 of 27 for Brunei means it will take 27 years before its oil reserves will be totally depleted (in 2047), assuming the production volume is constant, and no new reserves are discovered.
The numbers show the following:
One, proven reserves for both oil and gas for all countries keep rising through the years. Research and drilling technology keeps improving. Before, machines could drill down one kilometer only, now they can drill 10 kilometers or deeper. Modern fracking technology also allows for vertical then horizontal extraction of oil and gas, unlike traditional vertical drilling only.
Two, the R/P ratios for 2020 show that some countries can keep pumping and extracting oil for hundreds of years. Libya can keep it up for 339 years, Syria for 159, and Iran for 140. For gas, Iraq and Venezuela can keep producing for an average of 335 years, Qatar for 144 years, Iran for 128 years, Syria for 90 years, and so on.
Three, China, India, and Vietnam are ramping up their oil-gas reserves discovery — their gas R/P ratio now reach from 43 to 74 years.
Four, the US has a low R/P ratio of only 11 years for oil and 14 years for gas. This should be the main reason why US troops went to Iraq, Libya, Yemen, Syria, etc., to secure more oil supply for itself. US troops went to Syria uninvited from 2014 to the present and occupy a big oil-gas producing region. Such a practice is part of what the US calls “rules-based international order.” What a joke.
To criticize Russia’s invasion of Ukraine is understandable. But to criticize the occupation of Ukraine while justifying the occupation of a big portion of Syria is a joke.
Five, the total world reserves are almost doubling every 20 years (see Table 1).
So, to the question: Are fossil fuels — oil and gas in particular — soon to be depleted?
The quick answer based on the above numbers is “no.” The world will never run out of oil and gas, and coal too, so long as research, exploration, and extraction are left unpoliticized. The Earth’s crust is up to 70 km deep. Current drilling for oil and gas is not even 1/5 of the Earth’s crust.
So, if reserves and potential supply seem unlimited, why are oil and gas prices rising, or at least unstable (see Table 2)?
The quick answer is politics — too much politics in the world — military conflict and threats. Prior to the Yom Kippur war (1973) in the Middle East, Dubai crude was only $2/barrel in 1972. It jumped to $10.40 in 1974. Then there was the Iran revolution in 1979, followed by the Iran-Iraq war in 1980-1988. Dubai crude in 1978 was only $13/barrel, and it jumped to $30 in 1979 and $35.70 in 1980.
Most recently, the Russia-Ukraine war in February 2022 led to a big jump in oil prices by the middle of last year, but these have gone down to the pre-war level of below $85/barrel. The problem is not the war itself because Russia’s oil-gas production and exports were continuing. It was the economic sanctions where Russia would not be paid in US dollars or euros, and its central bank reserves of $300 billion were frozen. When more countries started paying Russia in rubles or China yuan or Indian rupees, Russian oil and gas began trading normally, leading to current low prices.
There are two lessons for the Philippines here. One, we should distance ourselves from the heavy net-zero lobby and narrative because it is based on false and dishonest claims that future fossil fuel supply will be depleted while demand keeps rising. Two, we should further expand and diversify our international reserves to more foreign currencies plus gold. This will help us address high price fluctuations on dollar-denominated merchandise trade.
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See also:
BWorld 598, High inflation in the Philippines could be due to dynamic domestic economy, May 06, 2023
BWorld 599, Growth projection, electricity generation and PPP Center, May 07, 2023
BWorld 600, Taxpayers’ burden from uniformed pensions, May 11, 2023.
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