The global oil supply - prevailing situation and prognosis.

Abstract

Keywords: peak oil, crude oil, petroleum, Energy Returned on Investment, EROI, Energy Returned on Energy Invested, EROEI, hydraulic fracturing, oil sands, tar sands, ultra deepwater drilling, unburned carbon, global oil production, unconventional oil, conventional oil. 1. Introduction It is fair to say that the 'peak oil' scenario does not appear to have played out as straightforwardly as was being anticipated around a decade ago (1). At that time, the prediction was that the global production of oil, having peaked (1) around 2005 (to precede the bumpy plateau that it has been on ever since (2)), would fall into an inexorable decline and be unable to keep pace with demand for it, leading to enormous hikes in the oil price, perhaps to $200 a barrel. The (Brent) oil price (Figure 1) did indeed rise to $ 147 on 11 July 2008, but this had fallen to around $32 a barrel by the end of December, in that same year. The prices subsequently rose (3) to above $100 a barrel in March 2011, and remained high for the next few years, before crashing from a record $115 for Brent crude in June 2014, to just under $60 (a fall of nearly one hall) by the end of the year. Having declined to a low of $30 a barrel in Januaiy 2016, Brent crude is today (4) (29 March 2017) trading at $51.Thus, there are complex and interlocking forces at play, to which the price of oil is highly sensitive, which have included such events as the Lehmann Brothers financial collapse, the death of King Abdullah in Saudi Arabia (with attendant uncertainties over the future of the Kingdom), and the relative oversupply of oil against demand for it, primarily due to hydraulic fracturing of shale in the U.S., along with Canadian oil sands production, which caused the price of oil to initially plummet and then to languish as it has for the past three years. However, whatever may be quibbled over the cost/price of oil in $, the true measure of production viability is Energy Returned on Energy Invested (1-5,6) (EROEI)--sometimes the equivalent term, Energy Returned on Investment (EROI) is used--since it takes energy to produce energy, and ultimately it is primary input energy that is the determining factor in the production rate of a resource (i.e. physics trumps economics). The 'peak oil' concept (1) was never about 'running out of oil' per se, rather maintaining the global oil supply given not only prevailing technical, but also economic limits. An increasing reliance on unconventional oil--i.e. 'tight oil' produced by hydraulic fracturing ('tracking') of shale, oil from oil sands, (ultra) deepwater drilling etc.--means falling EROEI (1,5,6), higher production costs, higher carbon emissions, and less available energy for society from the total primary energy that is available, if more of that energy is consumed by overall energy production. However, it was only the very high oil price (3) that prevailed prior to its crash in 2014, which rendered alternative sources, such as recovering oil from shale by hydraulic fracturing, and processing bitumen from Canadian oil sands, economically viable. In the present period of low oil prices, the high costs of producing oil from these sources are pushing companies to the verge of bankruptcy (7), and further investment in them is stalling. 2. The global oil supply in overview The majority of the total energy (8) used by humans on Earth is provided by crude oil (33%), followed closely by coal (30%), and natural gas (24%); hence we are reliant on the fossil fuels for 87% of our primary energy. In terms of low-carbon energy, nuclear power provides 4%, and hydro-power 7%, with renewable energy (mainly wind and solar) contributing just above 2% of the total. Prior to about 1930, oil could be produced at an EROEI of 100, but this has declined over time (it is now nearer to 17 as a global average (6)), and is falling further (9,10) as unconventional oil sources increasingly make up for the decline in conventional production. …