Key questions Are we running out of oil? Will strong oil demand persist? Will Opec expand capacity? What is the future for oil prices?
Are we running out of oil? No – plenty of oil liquids left to develop But – remaining reserves concentrated in Middle East and FSU Non-Opec production excluding FSU and unconventional oil is already on plateau Non-Opec including FSU/unconventional oil expected to peak around 2010 Middle East Opec will have to supply most of the new oil to meet future demand growth
Problem is not how much oil... billion barrels Cumulative production701 Known oil reserves890 Undiscovered 210 - 728 Total (without growth) 1800 - 2319 Reserves growth 0 - 684 Total (with reserves growth) 1800 - 3003 Heavy/extra-heavy oil 460 - 600 Bitumen/tar sands 300 - 400 Total (with unconventional) 2560 – 4003 Natural gas liquids ~200 Oil liquids yet-to-be produced 2000 - 3500 Oil shales ~14,000 Source: USGS, Campbell & Laherrere
... to be filled by Opec? Source: IEA, World Energy Outlook, 2004
Will strong demand persist? Recent acceleration in global oil demand Huge potential of developing economies But are high growth rates sustainable? –limits on carbon emissions –supply security issues –who will provide the extra capacity?
...but market power = higher prices Source: IEA, World Energy Outlook, 2004, Opra
What is the future for oil prices? Opec policies now favour high oil prices No alternative to Middle East oil reserves Oil demand will be constrained by: –high oil prices –carbon emission limits –supply security concerns Iraq remains a wild card
WHY ARE OIL PRICES SO HIGH? David Long Oxford Petroleum Research Associates Flame 2005 www.oxfordpetroleum.com