Is Oil Abundant or Scarce in the Global Market?

The world is thirsty for energy, and the evolution of various forms of it, from fossil fuels (oil, gas, and coal) to nuclear and clean energy, is one of the most sensitive and at the same time exciting topics of interest for futurists. Transitioning from polluting and dangerous energy sources to clean energy, if achieved, will mark one of the greatest revolutions in the history of human civilization. However, the path to this transformative transition is still long, and fossil fuels, despite their dangerous consequences for the planet, will continue to drive a significant portion of the global economy for at least the next thirty to forty years, unless very important events in technological, economic, and environmental fields completely change the way energy is produced and consumed. Among fossil fuels, oil holds a special place because its production, transportation, storage, and use are relatively easy, and since the late 19th century, it has played a very important role in shaping and accelerating the growth of industrial countries and increasing their production, commercial, and military capabilities. Additionally, the fate of several countries with hundreds of millions of people is tied to oil production and exports, and fluctuations in its price in the global market have a decisive impact on the economies of these countries as well as their security and future. Considering all these factors, for several decades now, similar questions have been persistently raised about the future of oil in financial and economic circles, think tanks of international relations, and security and military centers, including how much oil is left underground? Will the investments made in the oil sector meet market needs? How will oil prices evolve based on supply and demand levels?... These key questions have, in some cases, received different and sometimes even contradictory answers. Many variables, from scientific and technical advancements to economic developments and geopolitical events, affect oil supply and demand, price fluctuations, and consequently the assessment of the future of this commodity. Given the fall in oil prices, investments by major companies in oil fields have dropped, an event that, according to the International Energy Agency, could create a severe short-term supply shortage. Even today, at the end of the second decade of the 21st century, despite significant advancements in data collection and processing, predicting the future of oil remains fraught with difficulties. The result of these difficulties is the disagreement among expert sources regarding the future of the global oil market. The differences and contradictions among expert opinions can sometimes be real and sometimes merely superficial, as issues are examined from various angles and the time frame (short-term, medium-term, or long-term) for these analyses is not uniform. We refer to the latest examples: First) In late January of this year, the annual and forward-looking report by British Petroleum on energy prospects stirred controversy by stating that oil is much more abundant in the world than previously predicted. According to the authors of this report, the recoverable oil volume reaches 2,600 billion barrels, which is equivalent to twice the consumption of this commodity from now until the year 2050. The same report states that some of the recoverable crude oil may remain underground forever due to a lack of market for it. The British Petroleum report contradicts the 'peak oil' theory that was prevalent in the first decade of the 21st century. Based on this theory, oil production has reached its final limit, and the time for its irreversible decline has arrived. The decline in oil production naturally raises the issue of supply shortages and, consequently, the inevitable surge in its price. British Petroleum rejects the decline of oil resources and the reduction of its supply in its report. There is no shortage of disagreement over the world's oil inventory and its price evolution. From the published data in this regard, the most logical conclusion is likely that oil prices may rise in the short term, but long-term developments in oil production and supply will certainly not benefit countries that have tied their economy and fate to this commodity. Second) In the annual report of the International Energy Agency (which supports the interests of industrial oil-consuming countries), published on March 6, emphasis is placed on the risk of an oil shortage in the near future. This report states that in 2015 and 2016, investment in oil exploration and production significantly decreased because the price of this commodity, which reached $114 per barrel in mid-2014, has sharply declined over the past two years and is currently not more than $56 per barrel. Given the fall in oil prices, investments by major companies in oil fields have dropped, an event that, according to the International Energy Agency, could create a severe short-term supply shortage. Even if this year large oil companies resume their investments, it will take several years for new investments to reach production. The result is that the gap between supply and demand will widen after 2020. In 2022, global oil demand will reach 104 million barrels per day, while OPEC and non-OPEC producers will only supply 99 million barrels to the market. This five million barrel difference between supply and demand, according to experts from the International Energy Agency, could once again lead to a sharp increase in oil prices. Third) Some other expert sources in the oil market doubt the accuracy of the International Energy Agency's forecasts. They believe that the agency has not adequately considered unconventional or shale oil production in the U.S. and its production outlook in other regions of the world. Shale oil is obtained from the hydrothermal dissolution of oil-bearing rocks and possesses the characteristics and uses of conventional oil. The production cycle of unconventional oil (shale) is much shorter than that of conventional oil. Conventional oil production requires complex and lengthy investment projects, whereas in the case of unconventional oil, if the necessary equipment and manpower are available, drilling and extracting oil through hydrothermal dissolution can be done within weeks. Critics of the International Energy Agency argue that the agency has not accurately calculated the massive investments in unconventional oil fields (shale) in the U.S. Furthermore, due to technical advancements, the cost of producing unconventional oil (shale) has significantly decreased. Currently, unlike before, even if the price of oil per barrel falls to $25, shale oil production in some fields in the U.S. will still be profitable. In other fields, the costs are higher. According to some estimates, the average cost of producing a barrel of shale oil in the U.S. currently fluctuates around forty dollars. U.S. oil production has now exceeded nine million barrels per day, and with the increase in unconventional oil (shale) production, the country's exports could significantly boost global oil supply in the not-too-distant future. Moreover, unconventional oil reserves are not limited to the U.S. and are abundant in many regions of the world, including Russia and China. Technical advancements in this area and the dissemination of this technology across the globe could create a significant structural change in the global oil market. We see that there is no shortage of disagreement over the world's oil inventory and its price evolution. From the published data in this regard, the most logical conclusion is likely that oil prices may rise in the short term, but long-term developments in oil production and supply will certainly not benefit countries that have tied their economy and fate to this commodity.