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Future of the oil industry

The oil industry future has been becoming gloomier with each passing year and each comprehensive study of supply and demand. Studies which matched the known oil and gas reserves with the rate of usage have commonly expected the world oil supply to last about another 30 years. While this statement is true, it is also dangerously false, because both figures are either incorrect or unknown..

An accurate prognosis of the oil industry future is based upon knowing four sets of figures on the supply side and one set of figures on the demand side. At present, both sides of the equation offer a moving target.

SUPPLY

The first source of supply for calculating the supply side of the earth's oil and gas is the active reserves. This is oil and gas in a location and condition where it can be acquired with today's technology and at a cost which result in a profit for the oil industry. As the fuel prices increase, this pool of oil and gas reserves fluctuates, because the profit increases due to the increased fuel price. Therefore, more of this oil can be placed into production profitably.

The second source of supply is that of reserves which exist but cannot be acquired profitably. Again, if fuel prices increase, that will increase category number one which will decrease this second category by an equivalent amount, resulting in no net difference. An example of this category is oil shale, which is available but not profitable to product. If prices of the final product increase enough to make the production of oil shale profitable, it becomes a category one item and moves from the category two, resulting in no increase for the supply side equation, which means no change in the oil industry future.

Category three of the supply side is political reserves. The only thing certain about this figure is that it is incorrect. The reporting system was implemented in 1985 under OPEC's quota system and the amounts reported by each of the OPEC nations as reserves (and thus available for oil production and oil profits) suddenly shot upward. Each oil producing country reported higher reserves than previously in a campaign to be able to produce and sell more oil in relation to its oil producing neighbors and thus earn more profits in a shorter period of time. Since this figure is now blatantly false, no one can know what impact it will have on the oil industry future.

Category four of the supply side for looking at the oil industry future is the frozen reserves. These are figures which do not change each year as one would expect if they were true supply calculations. In recent years, most oil producing nations report the same reserve figures as those during the previous year. This means the supply exactly matches the demand or the figures are false in the first place.

DEMAND

The calculation of a 30 year expectation for the oil industry future is based on a production figure of 52 million barrels per day by the year 2010, but based on current consumption rates, by the year 2010, the world will be using oil at the rate of 94 million barrels per day. In 1997 supply and demand were roughly equal, but huge growth of demand in both first world countries and newly developing countries means the consumption rate will soon outpace the supply rate leading to total economic disruption with resultant breakdown of society. The oil industry future does not look healthy and neither does the future of societies which depend upon the oil industry