We Have Way More Than 53 Years' Worth of Oil Left

We are a long ways off from seeing the sunset for the oil industry. Photo Source: Chesapeake Energy media relations.

The year 1981 just called and said that we are out of oil. Well, according to estimates from the time, we should be. 

Back then the world consumed just under 60 million barrels per day, and global proved reserves for oil stood at almost 700 billion barrels. At that rate, the world should have exhausted all its proved reserves sometime in December 2013. But instead of the last drop of oil being squeezed out of the Earth, global production has increased by 46%, and global reserves now stand 1 trillion barrels higher than they did 33 years ago.

Did some geological miracle more than double the amount of oil we have produced in the past three-plus decades? No. It's more of a disconnect between how much oil is physically left in the world and how data related to oil reserves is reported. Let's look at why these numbers have been misleading for so long and why today's current projection of 53 years of oil remaining -- based on recent numbers from BP -- is likely wrong as well.

Somewhere between 53 and 250 years, take your pick
There are a multitude of ways to describe the amount of oil remaining, but the most common is known as proved reserves. When you divide proved reserves by total production, you get the reserves-to-production ratio. This is where the 53-year estimate comes from and where that 32-year estimate originated in 1981. While the number is easy to understand, it's a red herring because it assumes production will remain constant forever and that the current proved reserves estimates represent all the oil left. As we all know, this simply isn't the case.

The problem with the term "proved reserves" is that many assume it describes a physical limitation on oil, but it is actually a calculated economic limitation. Every country has a slightly different way of calculating the amount, but the basic gist is that proved reserve estimates are what companies assume they can pull from the ground using existing technology while still generating a profit, which is based on the price of oil or gas over the past year.

This estimate can be impacted by several things: new technology that makes oil recovery less expensive, new reservoirs that were not considered economical at the time, or simply that a rising price of oil makes those once unattainable resources attainable. Overall, this is a relatively small amount of oil compared to the total physical amount of petroleum that is in the ground. The following image from the U.S. Energy Information Administration gives a visual idea of this concept. It is not to scale.

Source: U.S. Energy Information Administration.

In fact, looking at the historical trend of the world's reserve-to-production ratio since 1980, we are actually at one of our most abundant times in terms of proved reserves.

Source: BP 2014 Statistical Review of World Energy, IMF Commodity Prices Index Database, U.S. Energy Information Administration and author's calculations.

This is only the tip of the iceberg, though, because these projections don't include technically recoverable resources that are not yet deemed economical at today's prices. Considering all of the technically recoverable resources, we have enough oil to last us over 100 years at current production levels. Furthermore, if we also include more complicated oil reservoirs such as kerogen deposits, then we may have more than 250 years of oil supply. It all depends on how much consumers are willing to pay for that oil.

What a Fool believes
I'm not here to thumb my nose at peak oil theories, because there is an actual physical limit to the amount of oil in the ground. In fact, there are trillions of potential barrels of oil in Mother Nature's pressure cooker as we speak, but it will likely take thousands of years before they become oil reservoirs like those we are accustomed to drilling today. It is much more likely, however, that we will reach the economic limits of extracting oil from the ground before we reach the physical limits. 

As investors, it is important to understand this dynamic because it prevents us from making hasty decisions about long-term investments. Is it possible that we will no longer use oil 53 years from now? That's not likely, but if it happens it will be because we have developed alternatives that are more economical, rather than running up against the physical limitations of what's underground.

Read/Post Comments (2) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 02, 2015, at 6:14 AM, drewwww wrote:


    You quote a 46% global oil production rise since 1981 as evidence that reserves are plentiful, and that we're technically living in more "abundant" times than ever before.

    I for one agree -- even the local homeless people where I live appear to live like kings. They literally demand a dollar from me, then waddle into a fast food establishment to be almost miraculously presented with a steaming hot double cheeseburger with no pickles.

    Human population since 1981 has seen an increase of 62%. If your 46% figure is correct, and I'm assuming it is, shouldn't we really be producing something more like 62% more oil now in order to really be "as abundant" as we were in 1981? Doesn't this discrepancy make it seem quite "abundantly" clear that there is a "per capita decline" in oil production taking place? Any comments?

  • Report this Comment On January 03, 2015, at 10:19 AM, gramps2390 wrote:

    great article. Very informative. I was not aware of the different types of oil reserves.


    I think it depends on how you define more abundant. I believe what the author is claiming (or at least my interpretation) is simply that we are producing more oil than we were in 1981.

    It proves that the estimates in 1981 were not reliable estimates because despite what they said, we not only have surpassed the date they predicted, but we surpassed the date while producing much more oil than the estimates were using in their calculation.

    If you want to define abundance of oil by oil per capita, then I guess that would mean that it is less abundant now than before. but that doesn't mean we do not have more oil, it just means demand is growing faster than the supply. We are outgrowing our resources.

    If I go from working at McDonald's to working at Royal Dutch Shell, the amount of money I have coming inn will be much more abundant whether I decide to get married or not. If I did get married and have children, I still have more money than I did, I would just be outgrowing the supply of it.

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3049294, ~/Articles/ArticleHandler.aspx, 8/30/2015 3:59:00 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Tyler Crowe

Energy and materials columnist for

Today's Market

updated 1 day ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes