Student Post: More realistic US oil reserves

With high gas prices, many on the right call for more drilling, exploration, and leasing and many on the left call for investment in renewable energy which will be cleaner and cheaper in the long run. Recognizing that the solution of drilling more holes in the ground will be unlikely to lower gas prices over the long term in any significant way and therefore research in renewables is warranted, it is still helpful to be realistic about how much oil could be recovered and therefore how quickly this switch may come.

That is why I found this article (link at the bottom) from the Institute for Energy Research so interesting. IER is a non-profit group that conducts research and analysis on energy issues that has in the past been funded by groups like Exxon and the Koch brothers which may tell you a bit about why they generally advocate for free market energy solutions and non-intervention by government in the energy markets. Now back to the article.

In the article it criticizes the Obama administration for picking the statistic that the United States has 2% of the proven oil reserves in the world as a reason to promote investment in renewables by way of showing we can’t support fossil fuel use without going out into the international market which has proven volatile in the past. However, the article goes on to show that proven reserves are a small subset of the total recoverable oil the United States has. I was particularly struck by the statistic that in 1944 the US had 20 billion barrels of proven oil reserves and as of 2010 it had 20.7 billion barrels of proven reserves. In that interim period the US produced about 167 billion barrels of oil. Now this doesn’t really prove anything going forward but it does show that the proven reserves statistic is a poor measure of how much oil could really be recovered. In fact the article points out that North Dakota’s proven reserves have increased 25 fold over 13 years.

The article states that technically recoverable oil numbers about 1,442 billion barrels of oil in the United States. That is about 75 times the proven reserves statistic. That technically recoverable oil statistic obviously does not mean that we could pull it out of the ground tomorrow or that it would reduce gas prices as some might claim. Much of that reserve requires the higher oil prices we have currently and maybe even higher in the future to be recovered profitably. However, the thing that I believe is the takeaway from the article is that we should be realistic about what reserves we have. This will lead to a more sensible time frame for an eventual move away from fossil fuels, and take out some of the urgency that we have seen in the last decade which it seems has led to some poor policies and even worse investment decisions through government programs.

http://www.instituteforenergyresearch.org/2012/03/13/exposing-the-2-percent-oil-reserves-myth/