No one can know for a fact how much oil is hidden below the earth's surface. Any number you see is a professional calculation based on geological engineering surveys. As oil prices go up, technology lowers costs, and more exploration is done, it becomes financially feasible to get more oil out. For that reason, any oil reserve projection is a moving target. This is known as "reserves growth."
Estimating oil reserves is very difficult and an inexact science. For example, estimates of proved oil reserves in the U.S. have remained unchanged, at around 20 billion barrels, since 1948. This is despite a production level of 2 billion barrels each year.
Most of the big fields in the proved oil reserves are in the Middle East, Venezuela and Russia. These countries have no incentive to produce accurate estimates. Market price for fossil fuels is driven more by production capacity vs. demand than by reserves. This capacity depends on investment decisions made by a small number of decision-makers in Saudi Arabia, Kuwait, Venezuela and Russia. Paradoxically, if the price of oil is rising and those few decision-makers become convinced that oil in the ground is appreciating faster than any other investment, they have an incentive NOT to increase production capacity. But, if they become convinced that new technologies will shortly replace oil, they then have an incentive to increase oil production while it still has some value, even if the price of oil is already falling. Perceptions of future technological advances could have tremendous impact on the oil market. (Source: Interview with Gavin Longmuir, a consultant with International Petroleum Consultants Association, Inc. He has over 25 years experience as a petroleum engineer in the global oil industry, specializing in the development of future oil fields, economic evaluations of exploration opportunities and assessment of new technologies. His PhD is from the University of Strathclyde, Scotland.)
Categories of Oil ReservesThe estimate of the total oil in the earth is known as ultimately recoverable resources, also called oil in place. It includes undiscovered or "yet to find" reserves. The measurement is based on the probability of finding reserves in certain geological areas, using new types of technology once it becomes economically feasible to extract the oil. Therefore, don't believe it when someone says the world will run out of oil on a certain date. Instead, oil will become too expensive to use long before it actually runs out.
Discovered oil reserves are divided into three broad categories:
- Proven Reserves - There is a greater than 90% chance that the oil will be recovered.
- Probable Reserves - The chance of actually getting the oil out is greater than 50%.
- Possible Reserves - The likelihood of recovering the oil is significant, but less than 50%.
Proven ReservesOf the three categories, the most important (and most commonly used) is proven oil reserves. That's where analysis of geological and engineering data demonstrate with reasonable certainty to be recoverable from known reservoirs. Only the oil that is commercially viable under current economic conditions is counted. That's because, if oil prices rise or new technology makes costs lower, then more fields become viable.
Reasonable certainty means that either actual production or conclusive testing has occurred. The testing includes drilling, or must be adjacent and similar to areas that have been drilled. The size of the field is determined by the edges where the oil contacts adjacent gas or water formations.
Oil is not counted as proven if engineers are uncertain whether it can be recovered under current economic conditions or it's in completely untested areas. Some engineers also don't count oil locked up in shale, coal or gilsonite. (Source: OPEC)
World ReservesThere is 1.532 trillion barrels of oil in the world as of January 2012. That's enough to last around another 50 years, since the world uses 84 million barrels per day. Only proven reserves are counted in the total world reserves. Therefore, this number changes every year, thanks to oil reserves growth. (Source: CIA World Factbook, Oil Proved Reserves)
Largest ReservesThe world's largest proven reserves are in just a few geologically special areas. Here's the number of barrels of proven oil reserves for the top 20 countries:
- Saudi Arabia - 262.6 billion.
- Venezuela - 211.2 billion.
- Canada (includes shale oil) - 175.2 billion.
- Iran - 137 billion.
- Iraq - 115 billion.
- Kuwait - 104 billion.
- United Arab Emirates - 97.8 billion.
- Russia - 60 billion.
- Libya 46.42 billion.
- Nigeria - 37.2 billion.
- Kazakhstan - 30 billion.
- Qatar - 25.38 billion.
- United States - 20.68 billion.
- China - 14.8 billion.
- Brazil - 12.86 billion.
- Algeria - 12.2 billion.
- Mexico - 14.2 billion.
- Angola - 9.5 billion.
- Azerbaijan - 7 billion.
- Ecuador - 6.51 billion. (Source: CIA World Factbook, Oil Proved Reserves, January 2012)
The list alone doesn't give the whole story, because of the relationships between the countries. Most of them produce more than they use, so they export to those that use more than they produce (importers).
To increase their negotiating power, some of the oil exporters have banded together to manage world supply and influence prices.Although this is a monopoly in most countries, and is illegal, it is perfectly legal in international law. The exporters have done so to keep the price of oil fairly high. Since oil is a non-renewable resource, when it's gone these exporters have nothing left to sell. Therefore, they want to get the highest profit possible while it lasts. They can only do this if they collude, rather than compete. That's why the Organization of Petroleum Exporting Countries (OPEC) formed in 1960. The 12 OPEC members hold 80% of the world's proven reserves. The biggest importers are the U.S., the European Union and China.(Source: OPEC FAQ)
U.S. ReservesThe United States Energy Information Administration reports a slightly higher figure for proven reserves - 25.2 billion barrels as of 2010. The largest reserves are in Texas, the Gulf of Mexico Federal Offshore, Alaska, California, and North Dakota. After years of stagnation, U.S. reserves are now growing again thanks to higher oil prices that make new technologies cost effective. Horizontal drilling and hydraulic fracturing can extract oil from shale and other "tight" (very low permeability) formations. Texas and North Dakota accounted for nearly 60% of the total growth. (Source: EIA, Proved Crude Oil Reserves)
In addition, the U.S. maintains the world's largest strategic petroleum reserve. It holds 727 million barrels. It's used to keep the economy running smoothly when there's a crisis or shortage. Since it is not open for production, it's not included as part of the U.S. proven reserves.
Shale Oil ReservesThe U.S. has 3 trillion barrels trapped in the Green River shale oil formation in Colorado. It costs $40-$80 a barrel to recover it, making it barely worth it at today's prices of around $100 a barrel. Extraction could also deplete the water table and damage the environment. However, if technology continues to improve and prices rise, it would be feasible to produce 100,000 barrels a day for 30 years. (Source: ABC News, American Oil Find Hold More Oil Than OPEC, November 13, 2012)
There are 15.4 billion barrels in the Monterey Shale formation near Bakersfield, California. There are also smaller shale oil deposits in North Dakota and Texas. However, these use fracking to get the oil out, which is opposed by environmental groups. (Source: NYT, Vast Oil Reserve May Now Be Within Reach, February 4, 2013)
Oil SandsOil sands reserves are located in Canada, Venezuela, Russia and the U.S. However, most of it (168.7 billion barrels) is in Alberta, Canada. The U.S. imported 1.3 million barrels per day, or 7% of its total demand, from these fields in 2011.
Oil sands is actually sand mixed with a thick substance called bitumen. The bitumen must be heated before it can be used as oil. Two tons of sand must be mined, using three barrels of water, to get one barrel of oil. The process is controversial because is uses a lot of energy and water, and leaves a scar on the environment that can be seen from space. However, miners are required to restore the area to its original condition after mining.(Source: Alberta Canada Oil Sands; Fuel Chemistry Division) Article updated March 17, 2013