Will the world run out of oil? An exhaustible resource that will not run out

In recent decades, many economists and experts have asked this question. It seems clear that oil is a finite good, however it does not have to run out. The arguments that can be put forward to believe that ‘black gold’ will never run out, because human beings will use other energy sources before the last barrel of oil is extracted, are becoming more and more powerful.

This is what CaixaBank researchers suggest in their latest report, in which they analyze in detail the past, present and future of oil. These economists show the price of oil in real terms (discounting inflation) from 1970 to the present day. The graph does not show a clear trend, simply cycles derived from factors that have little to do with the amount of proven reserves.

Every time prices skyrocket due to certain circumstances, the oil industry increases its investment in exploration and technology to find new ways to extract oil more efficiently. Thanks to the technology applied to this industry, crude oil can be extracted from ultra-deep waters or through hydraulic drilling.

“The very long-term upward trend in the real price of oil that could be expected from its status as an exhaustible resource is barely visible.” The price of an exhaustible good whose demand is growing (in addition to being a fundamental good for a large part of humanity) should follow an upward trend as this good runs out. And it is that each barrel of oil consumed means that we are closer to peak oil. However, the price trend does not reflect this phenomenon.

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As CaixaBank experts explain, “reality has led to continuous discoveries of new deposits, to the point that, contrary to expectations, extractable proven reserves have not stopped growing during these four decades (since 1973). First, due to the discovery of conventional fields in new enclaves (Russia, Venezuela, Nigeria, etc.) and, later, thanks to the achievements in the extraction of unconventional deposits (deep waters, bituminous sands, shale oil, etc.)”.

proven oil reserves

Calculations made in 1980 showed that there was only 27 years of oil left. However, 45 years later (in 2015), it can be said that there is oil left for at least 57 years. The increase in proven reserves (technology today allows oil to be extracted at costs that were previously unaffordable) and energy diversification suggest that proven oil reserves may continue to grow.

In this way, the CaixaBank Macroeconomics Department states that oil will not run out. The greater commitment of governments and citizens to the environment, the increase in proven reserves and the advancement of technology will prevent the extinction of oil.

“In our opinion, today it suggests that the long-term dynamics of the oil price will not deviate from that observed during the last four decades: oscillations, predictably as strong or more than in the past, around a stable level in terms reais, equivalent to about 55 current dollars. Stone did not end because the stones will run out'”, the analysis states.

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