The Assessment and Importance of Oil Depletion

Oil provides some 40% of the world’s energy needs and as much as 90% of its transport fuel. It also has a critical role in agriculture, which provides food for the world’s population of six billion people. It is however a finite commodity, having been formed in the geological past, which means that it is subject to depletion. Given that it is of such great importance to the modern world, it is indeed surprising that more attention has not been given to determining the status of depletion.

There are several possible explanations for this strange state of affairs.

First, it is counter-intuitive. The weekly trip to the filling station is such a normal part of daily life that most people see a continued supply of oil as being as much a part of nature as are the rivers that flow from the mountains to the sea.

Second, depletion is strangely foreign to classical economics, which depict Man as the master of his environment under ineluctable laws of supply and demand. Never before have resource constraints of such a critical commodity begun to appear without sign of a better substitute or market signals. The absence of early market warning is due to expropriations that have obscured the natural trends that would otherwise have alerted us to growing shortages and rising costs. Tax by both consuming and producing countries has furthermore distorted the position. A related issue is a blind faith in technology, as epitomised by the dictum “the scientists will think of something”. Unfortunately, if they do, they will simply deplete the remaining oil faster.

Published in: Energy Exploration & Exploitation, Volume 20, Number 6, 1 December 2002 , pp. 407-435(29)
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