In this blog post, we examine how accurate oil depletion predictions are and explore how the R/P ratio and technological advancements impact oil reserves.
When exactly will oil depletion occur? Many people likely expect oil to run out in roughly 50 years, based on various media and sources. This would mean a world without oil arriving around 2075, and the depletion date predicted 50 years ago would have been 100 years from that point. However, those who lived through that era would know that the projected depletion date back then wasn’t significantly different from today’s estimates. In other words, whether in the past or present, oil is predicted to deplete in roughly 50 years. So, has oil been generated underground during this time? Yet, considering oil requires the long-term deposition and maturation of vast amounts of organic matter, it’s difficult to conclude that underground oil reserves have increased.
To resolve this question, an understanding of the Reserves-to-Production Ratio (R/P) for oil is necessary. R/P is a figure obtained by dividing proven reserves by production over a specific period, serving as an indicator of how many years of oil production are possible from the current state. Misunderstanding this indicator can lead to confusion between the R/P and the timing of oil depletion, resulting in erroneous judgments. However, it is crucial to note that R/P is a variable figure that fluctuates based on proven reserves and production levels. In fact, the annual R/P for oil has shown an increasing trend over time, suggesting that the period during which oil production is feasible is expected to extend.
So, what factors have caused this increase in R/P? Since R/P is calculated by dividing proven reserves by production, we can examine both aspects: proven reserves and production. If proven reserves remain constant, R/P would increase as production decreases. However, global oil production has actually increased since the 1980s. This is the result of rising oil demand alongside industrial development, which has also increased supply. Therefore, the cause of the R/P ratio increase lies in the growth of proven reserves exceeding the production growth rate.
Before examining the factors driving the increase in proven reserves, let’s look at its definition. Proven reserves refer to reserves that are technically recoverable with current technology, have a clearly defined location, and are economically viable. In other words, reserves that can be produced and are economically viable are included in proven reserves, and these can increase with technological advancement. The recent case of shale gas exemplifies this well. Shale gas became an economically viable resource due to technological developments like hydraulic fracturing and horizontal drilling. Beyond this, the development of enhanced oil recovery techniques, discoveries in deepwater and remote areas, and the development of resources like oil sands, extra-heavy crude oil, and tight oil are expected to lead to a continued increase in proven reserves.
The R/P ratio, production volume, and proven reserves described earlier effectively illustrate the characteristics of oil as a resource. Oil resources exist underground, with demand and supply fluctuating according to market changes. Resources are hidden underground, making it difficult to accurately determine proven reserves, and their economic viability can vary depending on accessibility and technological development. Furthermore, production volumes are highly volatile, reacting sensitively to economic and political factors. These characteristics inevitably cause the R/P ratio to fluctuate, which is why projected oil depletion timelines have remained similar over time. Even if we predict oil depletion will occur in 50 years today, it is highly likely that in 2075, we will still say 50 years remain.
In conclusion, even if all resources on Earth were discovered, predicting the timing of oil depletion would be impossible and unnecessary without securing those resources or accurately understanding the future development of the oil market. Substituting the R/P ratio into a formula to predict the depletion date is also impossible.
