The finiteness of crude oil: Are we running out?

Abstract

Oil is a controversial natural resource. One aspect of its controversial nature takes the form of periodic expressions of fear at the prospect of the depletion of this energy source, often referred to as Peak Oil Theory. Julian Simon was among the first to challenge the increasing scarcity scenario and argued that global oil stocks are increasing as a result of anthropogenic activity. He presented evidence that, since the 1860s, oil prices had been generally decreasing. Bjørn Lomborg set out to challenge Simon’s finding, and ultimately ended up siding with Simon, concluding that crude oil stocks are increasing and that there is no sign that the world will soon “run out” of this finite resource. This paper updates the earlier work by Simon and Lomborg to see if the trends that they documented have changed since their research was published. Updated data are presented on oil prices, stocks, and extraction rates. These updated data suggest that most of Simon and Lomborg’s findings still hold. The analysis provided in this report concludes that the depletion of oil stocks is not of utmost concern, and that continuous technological innovation allows for greater output per unit of crude oil consumed, thus essentially increasing the availability of crude oil, and giving new meaning to the term “finite” in the realm of natural resources. Of course, future alternatives are important to discuss, as issues associated with oil dependency remain relevant. But fears of running out of this resource seem to be unjustified.