NS4054 Spring Term 2017 Handbook of Oil Politics Paul Sullivan – Oil Supply Federal Reserve Bank of Chicago, Strong Dollar Weak Dollar

Supply of Oil I Paul Sullivan, Key Issues Surrounding the Supply of Oil What we are seeing is the peaking of conventional oil in many areas and: Potentially extreme increases in infrastructure and Piracy and terrorism risks for the oil industry Leads to a series of questions: Where can new oil reserves, conventional and unconventional be found? How much potential oil is out there? Answers are not as simple as one might think Different estimates of reserves Proved Probable Possible

Supply of Oil II 2. Next level of estimates might include contingent resources and perspective resources: Contingent resources Those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from known accumulations, but which are not currently considered to be commercially recoverable Contingent Resources may include, for example, accumulations for which there is currently no viable market, or where commercial recovery is dependent on the development of new technology, or where evaluation of the accumulation is still at an early stage. Perspective resources

Supply of Oil III Perspective Resources those quantities of petroleum which are estimated, on a given date, to be potentially recoverable from undiscovered accumulations If we add up the global reserves and resource base of conventional and unconventional oils it could be as much or more than 5 trillion barrels At the global use of 30,000m barrels a year recently and with a reasonable growth rate in demand over next 100 years – would have more than enough Still many uncertainties facing future of oil production Technological, economic, geological, political, and environmental

Supply of Oil IV Concerning the supply of oil, Sullivan concludes: We really don’t know how much oil or substitutes are out there, although it is probably massive It is unclear what the future of peak conventional oil reserves will trend towards, but many countries have already peaked and some others likely to join that group. We are unsure of the economics of oil exploration and production in the future We can be somewhat certain that The “cheap” oil has already been found and that The oil production in the future is likely to be from more expensive areas and more expensive processes – especially in the case of unconventional oil

Supply of Oil V We are unsure of the possible trends in oil exploration and production technologies that could add to our proven oil reserves and overall oil resource base. Still a lot of oil in the ground that might be brought out with new technologies Some reserves that look depleted could be reinvigorated with enhanced recovery techniques However there seem to be significant limits and might account for only 3m b/d today Unsure what they could account for in the future. We are also unsure about how future politics, political instability and war could affect oil exploration and production

Supply of Oil VI Not sure what future climate change will bring and what policies, directed at the oil industry, such changes could bring. Still sure it will take a long time to change from a mostly oil-based transportation system to something else If peak “cheap” oil and climate issues are to be serious problems for the future then we should get moving on this. -- will price signals provide the right incentives? What we now know as unconventional oil will likely be renamed as conventional oil as this process of energy change unfolds Some serious problem ahead for the production of oil, and these problems include the obvious technical and economic ones, but we also will have to face significant political and policy uncertainties.

Supply of Oil VII Oil reserves and resources might need to be redefined in the context of scenarios related to all the potential risks and uncertainties associated with future finds and future exploration. Peak demand may actually determine peak oil before we really get in a bind If peak conventional oil is a reality, then we really need to move on to the unconventional oils much more quickly and also re-fit our refineries and other energy-economy systems for this transition in a more systematic and methodological way than seems to have been so far. If global climate change is a serious problem, and is caused by fossil fuels then we need fundamentally to rethink direction of oil production in the future.

Supply of Oil VIII The future of oil will be very complex and changeable due to changes that an happen in Technologies Knowledge Geopolitics Economics and The often unpredictable nature of the systems within systems that the oil industry is connected with The key to the demand for oil in the future will be how the transportation industry changes If the politics of the areas where most of the oil is found change for the worse in a major way, then all bets off on what the future of oil will look like