Rising Gas Prices: A.D. 2057

BP’s Statistical Review of World Energy 2010, states that the world has an oil reserves-to-production ratio of 45.7 years.  An R/P ratio of 45.7 years means the number of years it will take to run through the known oil reserves; “Proved reserves of oil are generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known reservoirs under existing economic and geological conditions.”  And, “R/P ratios represent the length of time that those remaining reserves would last if production were to continue at the previous year’s rate.”

To put this in perspective, 45.7 years from now is the year 2057.  Many people alive today will still be alive then; most of the people born this year will still be alive then and will be at or near the peak of their careers or working lives as well as preparing to send their children to college.  They will also be planning (or hoping) for their retirements and looking forward to their first grandchildren.  Yet there will also be many as 11 billion people on the planet and 468 million people in the United States.  With the increase in population and the concurrent increase in material aspirations of previously underdeveloped countries, it is unlikely that oil consumption can remain at today’s already high levels.  Even if it could do so, that would automatically mean a decrease in per capita oil consumption in the already industrialized countries such as the United States—if the population increases but oil consumption does not, then each person must consume less oil to maintain current total (by country) oil consumption levels—and the most likely way for that to happen is through an (inevitable) increase in oil prices (including most especially in the retail price of a gallon of gasoline); it will make no difference if those higher prices are achieved through “speculation” or through pressures from “supply and demand”; somewhere along the price-setting process, the costs will inevitably escalate.  Sure, there will be periodic ups and downs, price swings that can (supposedly) be accounted for by short-term factors, such as unrest in oil producing regions, recessions, environmental crises, or equipment failures, but the general trend arching over these day-to-day or month-to-month hiccups will be inexorably upwards.

But of course, oil consumption will not remain the same; the combination of increasing population and increasing  aspirations/demand is more likely to increase oil consumption for quite some time.  Again, only increased oil prices will dampen the long-term demand for oil and extend the life of our oil-addicted societies.  One might hope, however, that new oil reserves will be discovered, and that those new reserves will not only be sufficient to significantly delay the day of reckoning but will be reasonably accessible.  But much of the new oil being discovered is much deeper than currently operating fields, much heavier and more difficult to refine, and therefore likely to be much more expensive than the light sweet crude that has fueled our economy in the past.  And these new reserves, even if they pan out, will be smaller than the great oil finds of the past.  These geological and technological factors, in concert with rising populations and their equally rising aspirations, will cause rising oil (and therefore gasoline) prices, and will do so regardless of how much new oil we may find.

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