Oil companies have made a number of new discoveries this year the New York Times reports, but it’s not enough to stave off a looming supply crunch.
The Times says oil companies have discovered 10 billion barrels of new oil this year. While it’s good news for oil companies who spend hundreds of billions annually looking for oil, 10 billion is small potatoes from a historic perspective, as you can see in this chart from Chris Nelder. As the Times later points out in the story, these aren’t super discoveries like we’ve had in the past.
Although they are substantial, the new finds do not match the giant fields discovered in the 1970s, like Alaska’s Prudhoe Bay, Ekofisk in the North Sea, or Cantarell in Mexico. They are also dwarfed by the last enormous discovery, the Kashagan field in the Caspian Sea, discovered in 2000 and estimated to hold over 20 billion barrels of oil.
Which could lead to a supply crunch:
Since the early 1980s, discoveries have failed to keep up with the global rate of oil consumption, which last year reached 31 billion barrels of oil. Instead, companies have managed to expand production by finding new ways of getting more oil out of existing fields, or producing oil through unconventional sources, like Canada’s tar sands or heavy oil in Venezuela.
These finds, while exciting, aren’t too surprising. They support what’s already known. The concept behind peak oil isn’t strictly about the physical amount of oil buried in the ground. It’s about the economics–and more recently environmental impact–of getting that oil out of the ground.
There’s plenty of oil in the ground, but the cost to get it continues to rise. In the Times’ story, oil executives say they need prices above $60 a barrel to get these new discoveries of oil out of the ground. If the price slumps again, as some fear it might, then the exploration slows and we get walloped. Of course, the flip side of that is higher prices of oil, which could also wallop the economy.
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