Unconventional Oil: Will It Satisfy Future Global Oil Demand?

Abstract

The role of unconventional resources (e.g., oil sands and extra-heavy oil) is anticipated to increase in the global oil market. Although we are facing a scarcity of conventional (low cost) oil resources, unconventional oil resources might manage (for a period of time) to supply constraints in terms of meeting expected increases in oil demand. Here, we use the ACEGES (Agent-based Computational Economics of the Global Energy System) model to investigate the potential impact of unconventional oil resources on the future evolution of the oil market on a global scale. The key assumption of the model is that technological improvements will allow unconventional oil production to increase at a rate similar to the rate of production of the conventional oil resources. An important observation from the ACEGES-based simulations is the significant shift of the peak production of oil (both conventional and unconventional) if and only if technological progress will allow upstream extraction rates for unconventional resources, similar to the historic extraction rates of conventional oil. Given the estimated potential of total oil resources, the ACEGES-based scenario suggests that the unconventional oil production may shift the peak year of total oil by 60 years or more, assuming favourable upstream investment plans and a continuous increase in the demand for crude oil products at a reasonable price. However, increased total oil production might not meet the unconstrained (high) growth rates of oil demand.