World Oil

Oil accounts for 40% of the world’s total primary energy demand and economic conditions are governed to a large degree by its availability.

It has been estimated that the original recoverable oil in the earth was 2,330 billion barrels (Gb). A recent study of oil and gas distribution and depletion ( Peak Oil by Colin Campbell, 1999) indicates that of this amount 90% has been discovered, 50% has been produced and that at present the world consumes four barrels of its known reserves for every new barrel discovered. In terms of numbers this equates to a production of 22 Gb/year, with only 6 Gb being discovered. The current depletion rate has been calcualted at 2.2% per year. So it is apparent that the gap between consumption and discovery is widening as oil moves from a surplus to deficit status.

A previous study by the EIA indicated that given an equal distribution of reserves, static consumption and production levels, there might be 100 years of consumption left. With 65% of the world’s oil reserves located in the Middle East, it is immediately apparent that global distribution of oil is not equitable and the graph below indicates that consumption and production are also widely disparate and bear little relationship to the presence of reserves.

North America, Far East and Oceania and Western Europe consume 77.5% of the world’s oil, produce 44.4% but actually only contain 12.5% of the world’s oil reserves. For these areas, 100 years is an unrealistically long period. The Middle East, in contrast, although containing 65% of the world’s oil reserves only produces about 30%, and consumes about 6% of the world’s supply. The graph below provides an idea of the distribution of reserves and related production globally (information provided by Campbell 1999).

*Conventional Oil excludes oil from coal or shale, Bitumen and extra heavy oil (>10°API), Heavy Oil (10 – 17.5°API), Deepwater Oil (>500m) and Polar Oil

According to current research by Campbell (1999), depletion is occurring currently at a rate of 2.2 % per annum. He states that there is already a price shock because of the world’s growing dependence on the Middle East, which has difficulty increasing its production rapidly enough to meet demand. He further predicts that in approximately ten years there will be an onset of global long term shortage when the Middle East will be required to supply at least 50% of the world’s oil and that it will not be able to meet this requirement.

This disparity places in the spotlight the increasing strategic significance of two global organisations, the Organization of Petroleum Exporting Countries (OPEC) and the Organisation of Economic Cooperation and Development (OECD).

OPEC was founded in 1960 to unify and coordinate the petroleum policies of the 12 major oil producing and exporting countries that comprise its membership. By setting production quotas, it has been able to manipulate the global oil price. This was noticeable in 1974 when their embargo on oil caused the price of crude oil to soar.

In contrast, OECD was instituted to counterbalance the role of OPEC and has a membership of 29 countries, all committed to market economies and pluralistic democracies. The OECD countries produce two thirds of the world’s goods and services. The core of original members was located in Europe and North America but has expanded to include countries from the rest of the world including Asia, Latin America and the former Soviet bloc. In its attempt to deal with OPEC’s ability to manipulate crude oil prices, the OECD has developed emergency strategies to help its member countries deal with crises such as energy supply.

World Gas

The utilisation of gas in the past has not been optimal. Due to economic constraints, most associated gas in the past was flared. Increasing concerns about diminishing energy reserves and environmental hazards are applying pressure on the industry to utilise a higher percentage of this gas. As a result, legislation has been introduced to control operators, and many countries are increasing their use of gas primarily for domestic consumption in order to decrease the amount of oil imported or to increase the amount of oil that can be exported. Growing utilisation has improved infrastructure and gas is becoming a primary focus for exploration in many areas.

From the above graph it is clear that countries tend to consume what they produce with the exception of Western Europe which is one of the largest consumers, and Eastern Europe and Africa which currently produce more than they consume.

Shaun Bakamoso

Greetings. I'm Shaun Bakamoso, and I'm thrilled to be your guide through the dynamic world of business news in South Africa here at With a passion for staying informed and a keen interest in the ever-evolving landscape of business, I've dedicated myself to providing you with timely, insightful, and comprehensive coverage of the latest developments impacting the South African economy. / Instagram