reserves – Olduvai.ca

How much oil remains for the world to produce? Comparing assessment methods, and separating fact from fiction

November 8, 2022

Abstract

This paper assesses how much oil remains to be produced, and whether this poses a significant constraint to global development. We describe the different categories of oil and related liquid fuels, and show that public-domain by-country and global proved (1P) oil reserves data, such as from the EIA or BP Statistical Review, are very misleading and should not be used. Better data are oil consultancy proved-plus-probable (2P) reserves. These data are generally backdated, i.e. with later changes in a field’s estimated volume being attributed to the date of field discovery. Even some of these data, we suggest, need reduction by some 300 Gb for probable overstatement of Middle East OPEC reserves, and likewise by 100 Gb for overstatement of FSU reserves. The statistic that best assesses ‘how much oil is left to produce’ is a region’s estimated ultimately recoverable resource (URR) for each of its various categories of oil, from which production to-date needs to be subtracted. We use Hubbert linearization to estimate the global URR for four aggregate classes of oil, and show that these range from 2500 Gb for conventional oil to 5000 Gb for ‘all-liquids’. Subtracting oil produced to-date gives estimates of global reserves of conventional oil at about half the EIA estimate. We then use our estimated URR values, combined with the observation that oil production in a region usually reaches one or more maxima when roughly half its URR has been produced, to forecast the expected dates of global resource-limited production maxima of these classes of oil. These dates range from 2019 (i.e., already past) for conventional oil to around 2040 for ‘all-liquids’. These oil production maxima are likely to have significant economic, political and sustainability consequences…

…click on the above link to read the rest…

How much oil remains for the world to produce? Comparing assessment methods, and separating fact from fiction

July 16, 2022

Abstract

This paper assesses how much oil remains to be produced, and whether this poses a significant constraint to global development. We describe the different categories of oil and related liquid fuels, and show that public-domain by-country and global proved (1P) oil reserves data, such as from the EIA or BP Statistical Review, are very misleading and should not be used. Better data are oil consultancy proved-plus-probable (2P) reserves. These data are generally backdated, i.e. with later changes in a field’s estimated volume being attributed to the date of field discovery. Even some of these data, we suggest, need reduction by some 300 Gb for probable overstatement of Middle East OPEC reserves, and likewise by 100 Gb for overstatement of FSU reserves. The statistic that best assesses ‘how much oil is left to produce’ is a region’s estimated ultimately recoverable resource (URR) for each of its various categories of oil, from which production to-date needs to be subtracted. We use Hubbert linearization to estimate the global URR for four aggregate classes of oil, and show that these range from 2500 Gb for conventional oil to 5000 Gb for ‘all-liquids’. Subtracting oil produced to-date gives estimates of global reserves of conventional oil at about half the EIA estimate. We then use our estimated URR values, combined with the observation that oil production in a region usually reaches one or more maxima when roughly half its URR has been produced, to forecast the expected dates of global resource-limited production maxima of these classes of oil. These dates range from 2019 (i.e., already past) for conventional oil to around 2040 for ‘all-liquids’. These oil production maxima are likely to have significant economic, political and sustainability consequences…

…click on the above link to read the rest of the article…

China Accelerates Renewed Gold-Buying Spree “To Diversify Its Reserves”

February 12, 2019

China Accelerates Renewed Gold-Buying Spree “To Diversify Its Reserves”

After China’s official gold reserves rose for the first time in around two years (since Oct 2016) in December, Beijing appears to have joined the global gold rush, increasing its gold reserves for the second month in a row in January to 59.94 million ounces.

As we previously noted, China has long been silent on its holdings of gold as many countries are turning away from the greenback.

The value the country’s holdings of the precious metal reached US$79.319 billion, increasing by more than $3 billion compared to the end of last year.

China is also trying “to diversify its reserves” away from the greenback, according to Jeffrey Halley, senior market analyst at currency broker OANDA. The analyst told the South China Morning Post that the state of affairs in global politics, including a trade war with the US, are driving China’s interest to buy gold as a “safe haven hedge.”

In January, China dropped to sixth place among the world’s largest holders of the yellow metal behind Russia. With its 67.6 million ounces of gold, Russia now stands in fifth place behind the US, Germany, France, and Italy.

Crucially, the size of the gold addition are far less important than the signaling effect – why did China decide now was the right time to publicly admit its gold reserves are rising?

After months of seeming stability in the yuan relative to gold, Q4 2018/Q1 2019 saw China seemingly allow gold to appreciate relative to the yuan

One wonders if Alasdair Macleod is on to something when he notes that if the yuan is to replace the dollar for China’s trade, officials will have to back it with gold…

…click on the above link to read the rest of the article…

Canada has NO Gold but a Mountain of Debt… Things Will End Badly

April 26, 2018

Canada has NO Gold but a Mountain of Debt… Things Will End Badly

While other central banks have been busy increasing their gold reserves, Canada sold off all its gold reserves in 2016. The Bank of Canada ranks last globally out of 100 major central banks.

There is precedence in a central bank selling off its gold, and it didn’t work out very well. In 1999, when the price of gold was low at $282.40 an ounce, the United Kingdom sold half of its gold reserves, worth approximately $6.5 billion. The sale raised $3.5 billion. By 2007, the price of gold had risen to $675.00 an ounce, and the UK had lost more than £2 billion. This financial disaster, known as Brown’s Bottom, did not work out well. And Canada appears to be following in its footsteps.

With many uncertainties globally, Canada’s gold sale could have serious consequences.

Fed signaling interest rate hikes =
Fed shrinking balance sheet =
National debt rising rapidly =
Household debt rising =
Weak growth =
Rising inflation =
Geopolitical risks =

But hey, things are going to be fine…

6:49 PM – Apr 24, 2018

In this age of fiat currency, many people forget that gold is actually money, and has never stopped from functioning as a reliable store of value. Gold is a relatively liquid currency and one of the most highly traded.

According to Canada’s senior Finance Department economist Morneau, the reason for the gold sale was the cost involved in storing the gold and the fact that gold offers a poor return. That seems like strange logic since gold has outperformed the S&P 500 since 2000. The price of gold went from $35.00 an ounce in 1967 to over $1,300 today.

As former Federal Reserve chairman Alan Greenspan has said:

…click on the above link to read the rest of the article…

Canada goes full Krugman. Finance minister jacks up borrowing and spending, confirms gold sale – Peter Diekmeyer

April 2, 2016

Canada goes full Krugman. Finance minister jacks up borrowing and spending, confirms gold sale – Peter Diekmeyer

Bill Morneau took centre stage last week in the Canadian Parliament and didn’t disappoint. The new Liberal finance minister’s first budget jacked up program spending across the board, to be paid for by borrowing and, eventually, presumably, money printing. His rhetoric was coated with suggestions that “economic growth” would solve the country’s problems. The only folks left out were taxpayers and savers.

On the face of it, Morneau’s logic makes sense. With interest rates near zero and the Canadian government’s debts among the lowest in the G-7, why not borrow a bit and invest in infrastructure? Well, there are several reasons – and all of them augur well for the future of gold.

Canadian government debt at record levels

Morneau is technically right. The Canadian government’s debt is at low levels compared to that of other advanced economies. However, those numbers are shaky. For one, they include only federal debts, not provincial debts. If you include all Canadian government debts including the provinces (US states are not allowed to run deficits), things look far worse.

Furthermore, Morneau’s numbers don’t include huge debts that the former Conservative Harper Government never bothered to record as liabilities, such as deferred pension and healthcare costs, a policy Prime Minister Trudeau’s Liberal government is continuing. Canada’s Fraser Institute estimates that such unfunded liabilities totalled nearly $4.1 trillion1 in 2014. Those unrecorded debts alone are equal to more than 200% of Canada’s GDP. Worse, Canadians, whose household debt-to-disposable-income ratios are at record levels, are in no position to finance those additional government obligations.

Sell off gold, spend the cash

During the hours before Mr. Morneau tabled the budget, he wandered into the lock-up room, where reporters were poring over advance copies of the document.

…click on the above link to read the rest of the article…

Benn Steil: Could China Have a Reserves Crisis?

February 16, 2016

BENN STEIL: COULD CHINA HAVE A RESERVES CRISIS?

Last summer, U.S. lawmakers were condemning China for pushing down its currency, arguing that it was still “terribly undervalued.” But those days may be long gone. Chinese and foreigners alike have been stampeding out of RMB, leaving the Chinese central bank struggling to keep its value up and prevent a rout.

The People’s Bank of China has been selling off foreign currency reserves at a prodigious rate to keep the RMB stable. At $3.2 trillion, China’s reserves still seem enormous. But they are down $760 billion from their 2014 peak, and $300 billion in just the past three months. As shown in the figure above, at the current pace of decline China’s reserves will, according to the IMF’s framework for reserve adequacy, actually fall to a dangerously low level in the spring. This means that China would be at risk of a balance-of-payments crisis, unable to pay for essential imports or service its dollar debt payments.

China has for years been pursuing what has been called the “Impossible Trinity”: controlling interest and exchange rates while leaving the capital account significantly open. Chinese residents are permitted to send up to $50,000 overseas annually – this is enough to allow trillions in outflows. So what can China do to staunch the rapid decline in reserves?

It could impose tighter capital controls, as Bank of Japan governor Haruhiko Kuroda controversially urged it to do. As shown in the figure, this would allow China to operate safely with fewer reserves. But it would also put a halt to China’s plans to transform the RMB into a major reserve currency.

China could also raise interest rates, which might encourage capital inflows and discourage outflows, but this would hurt growth in an already sinking economy.

…click on the above link to read the rest of the article…

It’s Just Not Saudi Arabia’s Year: First Oil Prices, Now This…

November 4, 2015

It’s Just Not Saudi Arabia’s Year: First Oil Prices, Now This…

Last week, in the latest sign of Saudi Arabia’s deteriorating financial condition, S&P downgraded the kingdom to AA- negative citing “lower for longer” crude and the attendant ballooning fiscal deficit.

To be sure, we’ve covered the story extensively and it was almost exactly one year ago that we flagged the quiet death of the petrodollar and explained the significance to a market that hadn’t yet woken up to just what it means when, thanks to plunging crude prices, producing nations cease to be net exporters of capital.

With more than $650 billion in SAMA reserves, Riyadh does have a sizeable cushion. However, there are a number of factors (in addition to low oil prices) that are weighing heavily including, i) financing the war in Yemen, ii) maintaining the lifestyle of everyday Saudis, and iii) preserving the riyal peg. Here’s a look at the breakdown of government expenditures:

When you mix heavy outlays with declining revenue, it means dipping into the warchest…

Here’s a bit of color from Deutsche Bank which helps to explain what we mean by “the cost of preserving the societal status quo”:

The largest energy subsidy beneficiary is the end-consumer in the form of fuel (petrol) subsidies. Bringing up the price of petrol to levels in the UAE, which earlier this year eliminated the petrol subsidy, could provide the government with USD27bn incremental revenues, or 20% of the budget deficit. However, this is a highly unlikely scenario given the demographic differential between KSA and UAE and the socio-economic impact that such an outcome (blended prices rising from USD0.11/l to USD0.5/l) could have within the country.

The Saudi government could look to increase electricity tariffs. This would be a challenge for residential consumption (51% of aggregate consumption) given the political/social impact, though it would present the highest incremental revenue benefit.

…click on the above link to read the rest of the article…

Once Burned, Twice Shy? Utica Shale Touted to Investors As Shale Drillers Continue Posting Losses

August 3, 2015

Once Burned, Twice Shy? Utica Shale Touted to Investors As Shale Drillers Continue Posting Losses

For the past several weeks, the drilling industry — hammered by bad financial results — has begun promoting its next big thing: the Utica shale, generating the sort of headlines you might have seen five years ago, when the shale drilling rush was gaining speed. “Utica Shale Holds 20 Times More Gas Than Previous Estimates”, read one headline. “Utica Bigger Than Marcellus”, proclaimed another.

The reason for the excitement was a study, published by West Virginia University, that concluded the Utica contains more shale gas than many estimates for the Marcellus shale, a staggering 782 trillion cubic feet.

“This is a landmark study that demonstrates the vast potential of the Utica as a resource to complement – and go beyond – what the Marcellus has already proven to be,” Brian Anderson, director of West Virginia University’s Energy Institute, told the Associated Press.

But those considering investments based on the Utica’s potential may want to pause and consider the shale industry’s long history of circulating impressive predictions, later quietly downgraded, while spending far more than they earn.

“The industry has not been generating enough money to cover its capital spending and dividends,” Fidelity Investments energy fund manager John Dowd told Barrons.

Indeed, while it is clear that the shale drilling rush has produced large amounts of oil and gas, (alongside wastewater and other environmental impacts), the financial prosperity promised by its backers has not seemed to materialize.

Burning Through Cash

Companies like Chesapeake Energy, the nation’s second largest producer of natural gas and one of the most aggressive advocates of the shale rush nationwide, have been hammered hard by low oil prices and high costs in 2015.

…click on the above link to read the rest of the article…

Blogger Ben’s Basically Full Of It

May 5, 2015

Blogger Ben’s Basically Full Of It

Ben Bernanke’s skin is as thin, apparently, as is his comprehension of honest economics. The emphasis is on the “honest” part because he is a fount of the kind of Keynesian drivel that passes for economics in the financially deformed world that the Bernank did so much to bring about.

Just recall that he first joined the Fed way back on 2002 after an academic career of scribbling historically superficial and blatantly misleading monographs about the 1930s. These were essentially zeroxed from Milton Friedman’s monumental error about the cause of the Great Depression. In a word, Friedman and Bernanke pilloried the Fed for not going on a bond buying spree during 1930-1932 and thereby stopping the shrinkage of money and credit.

In fact, excess reserves in the banking system soared by 12X during those four years, interest rates were at rock bottom and the US economy was saturated with idle cash. So there was no financial stringency——not the remotest aspect of a great monetary policy error.

Instead, what actually happened was that the US banking system was massively insolvent after a 12-year credit boom fueled by the Fed’s printing presses. This first great credit bubble arose initially from the Fed’s maneuvers to fund the massive war production surge of 1915-1919 and then from its fostering of a vast domestic and international credit bubble during the Roaring Twenties.

Alas, none of the Fed governors during the 1930-1932 credit contraction had graced the lecture halls of Princeton. But to nearly a man they knew you can’t push on a string, and that a healthy economy requires that busted loans and soured speculations must be purged from the financial system in order for sustainable growth to resume.

…click on the above link to read the rest of the article…

China Switches to Supporting Yuan as Outflows Mount: Currencies

January 26, 2015

China Switches to Supporting Yuan as Outflows Mount: Currencies

Managing the yuan is turning into a different game for China’s policy makers these days.

After more than a decade of curbing the currency’s gains to help turn the nation into a manufacturing colossus, there are signs the People’s Bank of China is now propping up the yuan to stem an exodus of capital that’s threatening the economy.

A gauge of capital flows on the PBOC’s balance sheet fell by the most since 2003 last month in a sign it’s selling foreign currency, while the yuan’s reference rate set daily by policy makers is at itsstrongest-ever level compared with the market price.

“Everyone thought the movie would never end, and suddenly it ended, so everyone is hurrying to leave,” Kevin Lai, an economist at Daiwa Capital Markets in Hong Kong, said by phone on Jan. 22. “The authorities need to think of a way to keep the audience in the theater” as the economy slows, he said.

China amassed a world-leading $4 trillion of foreign-exchange reserves by mid-2014 as exports surged and capital flowed in, attracted by a currency that strengthened for four consecutive years. Now that the yuan’s gains are faltering, the PBOC is trying to prevent its declines from turning into a rout that could deter investment just as the economy suffers its slowest growth in 24 years.

…click on the above link to read the rest of the article…

Ukraine Admits Its Gold Is Gone: “There Is Almost No Gold Left In The Central Bank Vault” | Zero Hedge

November 18, 2014

Ukraine Admits Its Gold Is Gone: “There Is Almost No Gold Left In The Central Bank Vault” | Zero Hedge.

Back in March, at a time when the IMF reported that Ukraine’s official gold holdings as of the end of February, so just as the State Department-facilitated coup against former president Victor Yanukovich was concluding, amounted to 42.3 tonnes or 8% of reserves…

… and notably under the previous “hated” president, Ukraine gold’s reserves had constantly increased hitting a record high just before the presidential coup…

…click on the above link to read the rest of the article…

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