Top Ten Things to Know about Oil Supply

A new Global Witness Report - Heads in the Sand: Governments Ignore the Oil Supply Crunch and Threaten the Climate

The report argues that governments have failed to acknowledge a looming oil supply crunch. Their collective failure means we have lost a decade in which action could have been taken. Recognition of the oil supply crunch would also have injected a sense of urgency and increased ambition into climate change negotiations.

Rising demand and falling supply means a growing gap: ten things you ought to know about oil supply

Many of these facts have been staring us in the face for some time. In some cases, they have been obvious for decades, and yet depressingly, they seem not to have been acted upon. When taken together, the sheer scale of the imminent oil supply crunch, and the extent of missed opportunity and failed leadership become apparent.

1. 1965 was the year in which the largest volume of oil was discovered. Since then, the trend in the number and average size of discoveries has been in decline.
2. In 1984 global conventional crude oil production exceeded the volume discovered, and the gap has continued to increase since then
3. In 2007, just over half the world’s crude oil production came from 110 oil fields, with approximately one quarter from just 13 fields. There are 70,000 smaller oil fields which account for just under half of the world’s conventional crude oil production
4. By 2007, out of the world’s 20 largest producing oil fields, 17 were over 40 years old. The volume of oil production from 16 of this group of 20 largest fields was below their historical maximum
5. The rate of decline in oilfields can be rapid. By 2007 the average post-peak production rate of decline was 6.7% per year
6. Between 2005 and 2008 conventional oil production ceased to grow, despite massive investment, increasing demand and prices. This failure to increase conventional oil production, despite all the right incentives, is unprecedented in the history of the oil industry.
7. By 2015, the IEA projected a potential 7m bpd gap between supply and demand.8 A gap of this size represents 7.7% of projected world demand of 91m bpd (barrels per day) in 2015.9 It is also the equivalent to over 60% of China’s projected demand, and 39% of that of the USA
8. Between 2008 and 2020, the IEA projects conventional crude oil production from existing fields to drop by almost 50%
9. To provide for its forecast demand for oil in 2030, the IEA stated that the world would require “Some 64 mb/d [million barrels per day] of additional gross capacity – the equivalent of almost six times that of Saudi Arabia today – needs to be brought on stream between 2007 and 2030.”
10. As if replacement of lost volumes of oil was not a big enough problem, the ratio of units of energy input required to produce each unit of energy output (EROI) from oil is also decreasing. In the USA for example, EROI has shrunk from approximately 100:1 in the 1930s to 14:1 today. Estimates for the EROI of tar sands production vary between 10:1 (a very optimistic figure) and 2:1. This means that, in energy content terms, each new barrel of oil is worth less than its predecessors.

Recommendations of the report

The priority recommendation is the need for international recognition of the underlying fundamental problems that equate to an imminent oil supply crunch. It is hard to see how effective solutions can be developed until there is widespread
recognition of the problem.

• Governments and appropriate multilateral agencies should publicly recognise the imminence of an oil supply crunch.
• Governments must act urgently to fast-track the development and the building of a sustainable set of safe energy provision systems and implement energy conservation measures.
• To that end, and as a matter of national security, global leaders should commit to dialogue about energy both within and between countries at the highest level.
• Transparency is required for global petroleum reserves and exploration data, on a field-by-field basis. This transparency should be extended to other key primary energy sources, such as gas, uranium and coal.
• Promising technologies must receive sufficient investment as a matter of priority; reliance only on market solutions is insufficient. These should then be rolled out to achieve economy-of-scale price reductions.
• The Copenhagen targets need to reflect a precautionary approach based on up-to-date scientific evidence and findings.