20 percent more oil in the ground

A friend from the USA, who visited me a month back, was surprised to find Britain not yet in the throes of a popular insurrection.  He gasped each time I filled up at a fuel station.  Clearly, he has yet to divine the depth of phlegmatic resources endowed to motorists stuck between junctions 8 and 12 on the M6.  Few of us now bother to ponder whether the recent price hikes should be put down to the laws of supply, demand and price, or to the addiction of the British economy to gouging fuel tax and duties from the hapless road user.  The Organization of Petroleum Exporting Countries (OPEC) refound its awesome powers of the 1970’s during 1998-9 and cut back production to drive a near tripling of spot prices.  Concerned that the political impact of this on a now globalized economy might bear down on them, the Saudi delegate to the recent OPEC meeting in Vienna announced an increase in Saudi crude production that halted the upward spiral.  Should Iraq be allowed to pump to capacity and Libya reach peak output, the situation would rapidly reverse.

It is a curious time, for the petroleum sector of the North American and European economies faces dwindling home reserves while their industrial production is hard hit by rising fuel prices – a case of ‘tails you lose, heads we win’, it might seem.  Since the Limits to Growth prognosis in the late 1960’s of rapid exhaustion of petroleum reserves, each decade has seen the ‘evil day’ recede into the future, as exploration frontiers have pushed forward and extractive methods become more efficient.  In its latest assessment of world fossil-fuel reserves, the US Geological Survey has taken everyone by surprise (greenwood.cr.usgs.gov/energy/WorldEnergy/DDS-60).

A new approach to estimation using the latest geological data from around the world’s petroleum-prone basins suggests that undiscovered conventional oil resources are 20 % larger than believed previously.  A substantial proportion of this increased estimate stems from evaluating the formerly overlooked  tendency for ‘finding elephants in elephant country’, i.e. hitting previously undiscovered reservoirs within or just beyond existing fields.  This suggests that old fields should grow by up to a quarter in the future (612 billion barrels or about 9 years of global production), while new exploration should come on stream with 732 billion barrels, eventually.  The estimates are not uniform, however.  European and North American production still remains doomed to rapid exhaustion, with the bulk of new resources adding to the already huge dominance of the Arabian peninsula, and to the worrisome former Soviet Union.

Despite the flurry of optimism among petroleum economists and the industry in general, a sober assessment is that the new USGS assessment delays matters by a decade or two at most, given the annual production of 27 billion barrels per year and 1.5 to 2% annual growth  – business-as-usual and barely a sign of significantly replacing petroleum with alternative, renewable energy sources that do not add to global warming.  Re-emphasis of the overwhelming dominance of the Arabian peninsula, North Africa and the former Soviet Union as suppliers to fuel continuing demand, and the certain increase in one-sideness of the economic relationship have big political implications.  Some analysts foresee a ‘second coming’ of OPEC, and greater tension surrounding the areas formerly in the Soviet sphere of influence.  China barely figures as a significant player, despite former optimism.

Water resources under threat

We now live in an epoch where the ‘first provision of any civilized society, after a system of laws, is a water supply’ has begun to pass definitively from municipal to privatized control.  The private sector in water provision is exploding worldwide, particularly in potentially profitable urban areas of the ‘two-thirds world’; i.e. the poorest countries.  This is a tendency explicitly encouraged by multi- and bilateral sources of developmental aid, such as the World Bank, departments of the EU and Britain’s Department for International Development (DfID).  Popular unrest concerning rapidly rising water prices are sweeping through the townships of South Africa and several South American countries, as people find themselves unable to pay for supplies and find them cut off.

The Water Systems Analysis Group of the University of New Hampshire, USA has released a depressing and highly detailed assessment of the future fragility of global fresh-water supplies (Vörösmarty, C.J, et al., 2000.  Global water resources: vulnerability from climate change and population growth.  Science, v. 289, p 284-288).  Their analysis is based on geographic cells half a degree square (about 55 km), and considers the fresh water flow by surface run-off and movement through shallow aquifers, which constitutes the locally sustainable supply (deep aquifers are non-renewable in the short- to medium-term, without being engineered for recharge by surface water) relative to population density and domestic, industrial and agricultural uses.  Unlike assessment of petroleum reserves (above), which stems from detailed information supplied by giant transnational companies, doing the same for water is at best a sketchy exercise, because of the wide variations in quality of data.

Using aggregations for individual countries suggests that one third of the world’s population lived in 1985 under conditions of water scarcity, and about 450 million faced severe water stress.  However, by looking more closely, on a cell-by-cell basis, the Group shows that levels of stress are grossly underestimated by conventional country assessments.  They found that 1.8 billion people had to survive 15 years ago at the highest level of water shortage.

To model future changes in water stress, the Group considered both climate and population change.  They based the first on a water-balance model that incorporates global hydrological information and the precipitation side of climate change modelling of the anthropogenic ‘greenhouse’ effect.  Climate change is subordinate to growing population and likely shifts in population (the rural to urban drift that is growing at present).  Things seem likely to improve for people living in or moving to relatively water-rich areas, but probably at the expense of worsening water quality.  The most dramatic feature is a possible 85% increase in the population subject to the highest levels of water stress.  Since agriculture that depends on irrigation centres in already water stressed areas for domestic and industrial use, the prognosis is doubly worrisome, since those areas are likely to face even worse food shortages.  Looking at individual drainage basins shows that some, including that of the Huang He (Yellow River) in China, which has the highest population density anywhere, seem destined soon to show an excess of demand over discharge.

It is not difficult to foresee from the Group’s analysis a rapidly approaching period of curtailment of economic activities, mass migration and conflict in transnational river basins.  The danger areas are overwhelmingly in the ‘two-thirds world’, where the search for profits by water companies finds strategic focuses at present.  Being the ultimate in supply-demand forces (demand for water is the least ‘elastic’ imaginable) this is hardly surprising.  It should, however, come as no great surprise if such ventures are expropriated by people themselves.


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