US crude reserves increased in 2007…. or did they?
The US Department of Energy (DOE) Energy Information Administration (EIA) has released their 2007 report on U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Reserves, and it contains a few whoppers. The EIA releases one of these every year, summarizing the state of US fossil fuel reserves and production. The numbers on production are pretty straightforward… oil and gas wells produce as much as they produce, it’s all counted up accurately when it goes to market. In contrast, the numbers on reserves – the amount of oil and gas still in the ground, and readily available for tapping – are much softer.
In their 2007 paper, the EIA report that US crude oil reserves went up 2%, not only replacing the oil pulled out of the ground in the last 12 months but adding some more to the grand total. If enough oil is discovered to match the amount produced, you call that a 100% increase in proved reserves additions. In 2007 the industry saw a 120% increase in proved reserves additions.
Except it didn’t. Although the numbers seem to suggest US oil supplies are just rolling in, the reality is not so rosy. In 2007 the total volume of oil in “new discoveries” under US land – I put it in quotes because everyone already knew the oil was there, they just didn’t tap it prior to 2007 – was 790 million barrels. That’s 28% less than the average amount of new oil brought to market within the US over the last decade, at 1,100 million barrels each year (averaged). In 2006 only 577 million barrels were “added” to the list of proven reserves. This “new” oil isn’t really new, keep in mind. No one was shocked to discover a new gusher anywhere. In this context, “new” oil is oil that finally became expensive enough to make it worth pulling up from below. It was already mapped, but still untapped.
How much oil counts as a “proven reserve” depends on how expensive the oil is at the marketplace. At over $100 a barrel, marginal oil that wasn’t worth the trouble before, suddenly is worth the trouble. The oil might be so deep that it costs more to sink a well that deeply, or it might be so thick it requires special technology to suck out of the ground, or it might contain too much sulfur (sour crude) that requires costly chemistry to remove before or during refinement. Economics determines what is “good” oil and what is “worthless” oil. When the price of a barrel rises to $200, or $500, all sorts of iffy dregs will become lucrative, and they’ll get added to the “proven reserves” list.
None of the “new” reserves are from fresh, untouched deposits. None are from National Park land. All of the “new” oil reported by the EIA was brought to market from existing, established fields; from difficult deposits that are now worth the trouble. The increase comes entirely from extensions to existing fields. That’s just how the petroleum market works. The problem comes in where people look at those numbers and say, “Oh, wow! The US has plenty of oil after all! Drill, baby, drill!” Not quite.
US petroleum production has been in decline since 1970, and it will never go up again. That doesn’t mean it’s not worth using what oil we have, it just means we can’t expect that more drilling will get the US to energy independence. Petroleum independence for the US is physically impossible, and not because of hippies keeping oil companies away from oceans of cheap oil under Yellowstone. We can’t drill our way to independence because petroleum is a physical, geologic substance, it is finite, and it is running low.
Here are some fun facts to toss around today at happy hour (all data from the EIA):
Total proved reserves of petroleum in the US, for 2007:
21,317 million barrels
Total production (pumped up and sold) of petroleum in the US, in 2007:
1,691 million barrels
Oil in new field discoveries and new discoveries in old fields, in the US in 2007:
139 million barrels
Consumption of petroleum in the US, in 2007:
20.6 million barrels per day
So, basically, the US uses enough oil in one week to match all of the new discoveries of oil under US land made during one year. Our total annual production of oil – everything we can bring to market from US territory in one year – could only supply the nation with oil for 82 days if we were suddenly cut off from the rest of the world. That’s with all the major oil companies in the US working day and night to pump and drill and refine every drop.
The US can either keep depending on foreign powers for our petroleum, in a world where everyone’s oil supplies have peaked and are now in permanent, slow decline, or we can start to think about where else to get our energy. We use a lot of oil, and we have very little of our own.
Now is it clear why “Drill, baby, drill!” is an idiot’s mantra?