The question on everyone’s lips, whether you’re in the gas and oil business or just a homeowner, is what will happen if we run out of oil?
We have all experienced the surge in oil and gas prices of the last few years making finding a deal from our energy supply few and far between. Oil and gas prices have surged due to the supply and demand of oil.
Supply and demand is basically how much oil is available. With the United States playing a bigger role in the supply of oil, due to the boom in production from shale fields there. So, if larger oil-producing countries are pumping out a lot more crude oil the supply will be higher.
As there is more of a supply, like with any product, it allows for oil prices to lower.
However, that’s where demand takes control. Demand is determined by how much need there is for gas and oil at any given time. We need to gas and oil for things like heat, electricity and transportation, seeing that there will always be a demand.
But as renewable energies come into play, the demand for gas and oil will be lower, seeing the supply to coincide with that. So, for those who still have a use for gas and oil will reluctantly be paying more later on as they’ll be more demand than supply.
The simple fact of matter is, we will never actually run out of oil but the demand for oil will become lower, in turn reducing the supply to make way for renewable energies. However, in 2012, it was estimated that there were 1.7 trillion barrels of oil, with the world consuming 86 million barrels a day, so it is easy to conclude that we will run out of oil in the next 55 years. On those figures alone it seems worrying but that is why understanding that an oil reserve is important.
What is an oil reserve?
Oils reserves are an estimation of how much oil can be ultimately recovered. Known as oil in place, it includes the undiscovered and yet to find reserves in the world. It is based on the probability of finding reserves in certain geological areas and whether it is economically feasible to extract the oil if found.
Once an oil reserve has been found, a contract is usually drafted by said country which defines specific hydrocarbon laws with the companies who with carry out the extraction. The country which has the oil is then divided into blocks and the country then formally invites global oil companies to bid on the blocks. If a company wins a bid they then have the right to produce oil from that block and how much of that oil belongs to the government all depends on the contract signed by the company.
The fact of the matter is we will end up finding alternatives to using gas and oil long before it runs out due to how expensive it will become over time.