I've been trying to understand why the cost of oil is skyrocketing. A year ago, economists were warning that if oil prices rose to a consistent $80 a barrel, it would spell disaster for our economy. And here we are at close to $130 per barrel and still climbing. I wanted to know, is this the new norm or is this a temporary spike? So, I decided to do some investigating. I went to the US Department of Energy for most of my statistics, and here is what I found.
First of all, we are currently maxed out. Worldwide production and demand are pretty much equal at present -- at around 85-86 million barrels a day. Not only that, but we are at our max in terms of refining capacity. Any increase in production would require building new refineries, and refineries cannot be built overnight. No wonder oil prices are going up! Now, with prices so high, demand may fall off a bit, and that could bring prices down a notch -- at least in the short run. But if demand continues to grow, so will prices. Up and up.
Secondly, we have an estimated 1317 billion barrels of oil left in known reserves. If we take the number 85.5 million barrels per day and multiply it by 365 days per year, we get an annual consumption rate of a little more than 31 billion barrels per year. At our current rate of consumption, we have about 42.5 years left of known oil reserves. But we are unlikely to stay at current rates of consumption. If the rate rises, we will have somewhere between 30 to 40 years left. At the historic rate of increase, 1.76% per year (average rate from 1994-2006), we will double our usage in 40 years. At the rate we have experienced in recent years (2003-2004), 3.4% per year, we will double in 20.5 years. So, to make it easier on ourselves, let's go with the middle ground -- let's say we have 35 years of oil left and at the end of the 35 years, our consumption will have doubled. That means that 35 years from now, we will need to have discovered and be ready to pump, refine and transport an amount of oil equal to twice the amount of oil consumed throughout the entire history of mankind! Now there may be undiscovered oil fields out there, but that many and that much??
The bottom line is this: life as we know it is about to change. Forever. With vision and aforesight, we can shape our future into something cleaner, healthier, and more at peace with the natural world. Or we can blindly stumble into the future, helpless victims of the coming change. The choices you and I make today will decide the future for thousands of generations to come. It's on us. There is no escape clause.