The ME Has 1/2 The Oil They Claim?

[Annie]

Links at site

http://www.washingtonmonthly.com/archives/individual/2006_01/008103.php

January 29, 2006

KUWAIT'S OIL RESERVES....This news is a week old, but I forgot to blog about it last weekend:

Word just came out that Kuwait, long regarded as home to some of the world's largest reserves of petroleum, may possess only half the amount of oil reserves that it officially has been stating for many years.

According to a restricted report issued by the authoritative industry newsletter Petroleum Intelligence Weekly (PIW), internal Kuwaiti records reveal that the nation's oil reserves are far below the officially stated amount of about 99 billion barrels....The PIW report is based upon data circulating within the top echelons of the Kuwait Oil Co....The PIW report claims that Kuwait's remaining proven and nonproven oil reserves total about 48 billion barrels, or 51 billion fewer barrels than previously advertised.

Stuart Staniford has more here, including a technical discussion suggesting that this news shouldn't come as a surprise.

For my money, though, you can forget the technical discussion. Instead, take a look at the second graph in Stuart's post, which shows that virtually every OPEC country abruptly increased their reserve estimates in 1986. Although this was partly legitimate (the American companies that had provided the earlier reserve estimates had been systematically too conservative for reasons of their own), the increases were mostly nothing more than a response to OPEC politics. Export quotas are based on reserve estimates, and in the mid-80s every country raised their reserve estimates in order to get a bigger quota. They hadn't suddenly discovered a whole bunch of new oil they never knew was there before.

My rough rule of thumb is that OPEC's real reserves are about halfway between the 1980 estimate and the 1990 estimate — or maybe a bit under that. Eventually it will be impossible to pretend otherwise, and we'll start hearing rumblings from other countries similar to those we're hearing from Kuwait. Buy a hybrid now and be prepared.

—Kevin Drum 2:24 AM