I want to post a quick rant on the uselessness of statistics about a country’s oil reserves. I was preparing this afternoon to write a blog post about the revolution in oil production in the US, caused by the adoption of new technologies of fracking and horizontal drilling in areas like the Bakken Shale and the Eagle Ford Shale.
The USGS reports that, with perspective additions, the U.S. holds 32 billion barrels (bb) of oil, 291 trillion cubic feet (tcf) of natural gas, and 10 billion barrels of natural gas liquids in mean potential undiscovered reserves. This is a substantial upwards revision from last year’s estimate – showing how the new technologies are revolutionizing America’s energy outlook.
Then I started doing the math. The U.S. uses about 18.7 million barrels of crude oil equivalent per day (mbd), according to the EIA. Of that consumption, we’re importing about 8.7 mbd, and producing about 10 mbd. That works out to a total annual consumption of about 6.875 bb of oil, of which about 3.65 bb is from domestic production. At those rates, America would completely exhaust its total reserves, as estimated by the USGS at 32 bb of oil in eight years, nine months. So, by April or May of 2021, the United States would no longer have any oil – if these reserve estimates went unchanged.
Clearly, the markets do not believe that the United States, the world’s third largest oil producer, is going to run out of oil by 2021. If people expected the U.S. to stop producing oil in 2021, there would be a significant run on the oil markets.
Now, this may simply be a difference between the specific, geologist-driven language in which you only state that which you absolutely know, but this needs to be clearer. The oil market, and the amount of U.S. production in particular, is at the center of this year’s election debate. Something is lost in translation.