InsideSources | March 6, 2017 | Erin Mundahl
In 2012, then-President Obama often repeated the line that the U.S. had only 2 percent of the world’s proven oil reserves, while American consumption far outpaced that. It was part of his argument for alternative fuels and green energy. Five years later, with gas prices much lower, the line seems bizarre. Was Obama wrong about the size of the proven oil reserves?
Throughout much of the 1940s, the United States had around 22 million barrels in proven oil reserves. Seventy years later, American proven oil reserves continue to hover at around 22 million barrels, despite decades of drilling. It’s not that once dry wells are filling up again. Rather, it comes down to the definition of proven oil reserves.
When it comes to oil, a large difference exists between proven resources and proven reserves. Resources implies the quantity of raw material in the ground, which can only be estimated. Reserves, however, is a commercial term.
“The term [proven reserves] is applied to known reservoirs where there is a probability of at least 90% that oil or gas can be produced in commercial quantities,” says William O’Keefe, former COO of the American Petroleum Institute.
“The fact that an area contains proven reserves does not guarantee production in economic quantities,” he cautioned.
This means that the size of American proven oil reserves can fluctuate dramatically on the basis of shifts in prices.
In December, the U.S. Energy Information Administration released trailing data on proved oil and natural gas reserves in 2015. The report shows the dramatic effect falling oil prices had on proved oil reserves. While oil production continued to increase in 2015, the sudden fall in prices made wells with higher extraction costs suddenly unprofitable.
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