Leonardo Maugeri, author of The Age of Oil: The Mythology, History and Future of the World’s Most Controversial Resource, asks, What Lies Below?:
How much oil lies beneath the Earth’s crust? The only thing we know for sure is that history is littered with estimates so far off the mark — usually below the mark — that they border on the comical. In the 1920s, for instance, the Anglo-Persian Oil Co. (now BP) refused to take a stake in Saudi Arabia, thinking that the country didn’t hold a single drop of oil. In 1919, the U.S. Geological Survey predicted that the United States would run out of oil in nine years. Yet by the time nine years had passed, huge discoveries, topped by the Black Giant field in Texas, had created a massive oil glut that almost destroyed the industry. In the 1970s, the consensus turned grim again: oil production would peak in the mid-1980s and then drop precipitously. A famous CIA report predicted the “rapid exhaustion” of accessible fields, while President Jimmy Carter warned that oil wells were “drying up all over the world.” Instead, in 1986, oil prices collapsed in the midst of a huge supply boom, as they had done many times before.
One reason for the underestimates is that the technology for recovering oil keeps improving:
Today the average recovery rate for oil is about 35 percent of the estimated “oil in place,” which means that only 35 barrels out of 100 may be brought to the surface. And only a part of those 35 barrels is considered “proven reserves,” which means they are immediately available for production and commercialization. The role of technology is critical. Over the decades, technology has greatly expanded the quantity of oil that can be extracted — through the injection of water and natural gas as well as horizontal drilling, hydraulic fracturing and more. All this progress has boosted the average recovery rate, which was only around 20 percent as late as 30 years ago, and less than 15 percent 60 years ago. In the future, further gains are expected from technologies that are still in their infancy.Simply put, new exploration methods have increased existing reserves over time, even without any new discoveries. The oil literature is full of examples. A most astonishing one is the Kern River field in California, discovered in 1899. In 1942 its “remaining” reserves were estimated at 54 million barrels. Yet from 1942 to 1986 it produced 736 million barrels, and still had another 970 million “remaining.” The one thing we can be certain about is that our knowledge of oil reserves is subject to constant revision, usually upward. That’s why, over the decades, all attempts to evaluate our planet’s oil endowment have proved too conservative, even when those estimates have included probabilistic assumptions about future discoveries and increases in recovery rates.