By Ganesh Bhaskar Lata

Oil is derived from fossil remains of ancient plants and animals. Through thousands of years of decomposition the remains of plants and animals, transform into oil which is crude. Oil forms a fraction of fossil fuels which generally consists of Hydrogen and Carbon and is spread across the crust of the Earth.

Companies have been selling oil for over a 100 years and human civilization is dependent on its reliable supply. Large oil companies generally make most profit at times of global crises, war, political turmoil, etc. For example, from 1985 to 1999 the Return on Investment for major American Oil companies was at two per cent as it was a peaceful period. But from 2000 up till 2007, the Return on Investment averaged at 7 per cent (EIA, 2018). This was due to the disruption in imported supply of oil from Venezuela, the Iraqi war and the hurricane Katrina.

The paramount association in the oil producing sector of the economy is the Organization of Petroleum Exporting Countries also known as OPEC. The main objective of OPEC is to maximise profits from the sale of oil by administering controls on world supply. OPEC is comprised of most Middle Eastern countries.  It accounts for 44 per cent of global oil production and 79 per cent of the global oil reserves (Basil, 2011). The OPEC plays a vital role in controlling the supply of oil.

For example, during the Yom Kippur War or the Ramadan War, the OPEC, implemented an Oil Embargo against countries supporting Israel in the war (Smith, 2006). The affected nations were the United States, United Kingdom, Japan and Netherlands. The cost of Oil had ascended from 3$ for every barrel to about 12$ (Anon, 2012). Increase in the costs, of oil based goods, following the emergency in the Gulf, added to around 75 percent of the expansion in the managed product cost (Anon, 2012). This was the first so called ‘oil shock’ faced by the world. In the years to come, there were several more. Oil has been used as a form of coercion on several occasions, it has been used to motivate countries to fight proxy wars, as a form of foreign policy, etc. Oil had become so integral in the functioning of daily life, that it becomes a key factor in determining various outcomes in previous historical events. As mentioned earlier, the first oil shock effected several countries economy. Japan for example started focusing on electricity as a means of power supply rather than oil and the Automobile industry in the United States suffered a major loss due to the lack of demand. Recent research claims that in the period after 1985, 10 years post the first oil crisis, the economy became more resilient to energy price increases. (Gorelick, 2009)

Oil has been used as a form of coercion for centuries. The very reason the Middle East has developed rapidly in such a short span is due to its monopoly over production of oil. In current times, a plethora of sources inform us that the reserves of Oil are depleting at a rapid rate. Some say that by 2020 half of the oil reserves would be over. Due, to this several countries are trying to develop alternative uses of energy.

Oil extraction is a colossal business. The total global sale of Oil in the year 2008 was 40 trillion$ which is way higher than the US federal budget itself.

Starting at now as showed by the United States Geological Survey, the world holds around 565 billion barrels of unfamiliar, in certainty recoverable customary oil; 5,606 trillion cubic feet of unfamiliar, recoverable normal vaporous oil; and 167 billion barrels of unfamiliar, in truth recoverable oil gas liquids, according to another appraisal by the U.S. Geological Survey (USGS, 2018).

Arguments which state that Global depletion of oil is imminent:

A plethora, of research emphasises the likelihood of Global Oil depletion. But, is there actually a lack of oil? This paper in that sense seeks to argue that oil reserves are not decreasing at a rapid rate and there are reserves left. There are various reasons regarding the speculation of depletion of oil reserves.  Several sources as I have mentioned earlier state that oil has been depleting over the decades, and the minimal reserves will get over. Has the crisis actually arrived?

One of the main reasons, researchers say that Oil reserves are depleting is because of over population. Thomas Malthus, the eminent British Economist and Demographer, stated that, “The power of population is so superior to the power in the Earth to produce subsistence for man that premature death must in some shape or other visit human race.” (Malthus, 1798). The United States of America is the biggest oil producing country that has encountered top oil creation  (Gorelick, 2009). Data shows that 101 countries have produced oil since 1980 and out of these, four countries account for 15 per cent of the Global Oil production, namely, the US, Norway, the United Kingdom and Indonesia. These four countries have seen a 40 per cent decline in the production of oil compared to their peak (Sandrea, 2006). Adding to this, the U.S. imports around 60 percent of its oil and if the completed oil based commodities are tallied imports ascend to 63 percent (Inspiration, 2018).

During the 1960’s, discovery of oil outpaced the production of Oil by nearly 10 to 1. But since the 1980’s production has started to outpace the discovery of oil, the ratio is now at 10 to 0.67. The United States Energy Information Administration predicted in 2006 that world utilization of oil will increase to 98.3 million barrels for each day in 2015 and 118 million barrels for each day in 2030 (Administration, 2011). With the 2009 world oil utilization at 84.4 barrels for each day, approaching the anticipated 2015 level of utilization epitomize a normal yearly increment amidst 2009 and 2015 of 2.7 percent, every year  (Administration, 2011).

Giving China and India’s enormous populations, the oil demanded by these countries have been increased further. China by itself adds more than 8 million individuals to its populace every year and has an Industrial Growth Rate of 10 percent (Nations, 2008). China is only second in position to the US with the annual consumption of Oil. China hitherto consumes large amounts of oil, adding to its large consumption the country manufactures less than half of its consumption of oil (Gorelick, 2009). It therefore, relies on imports.

India with a population of 1.3 billion people, has a large amount of oil consumption. India has outperformed China to end up the biggest patron of incremental oil utilization in 2016, representing 21.8 percent of it, as per BP Statistics (Times, 2017). The International Energy Agency anticipates that India’s oil appeal will rise the speediest—by 6.0 million barrels for each day to 9.8 million barrels for each day in 2040  (Bhuyan, 2015). It anticipates that oil generation will fall behind demand, pushing oil import reliance over 90 percent by 2040. (Bhuyan, 2015). Due, such instances, several countries and sources inform us that Oil depletion is a reality. They therefore, encourage its citizens to use alternate forms of energy.

Arguments against the imminent Global depletion of oil:

As mentioned earlier this paper focuses on disproving the various sources that inform us that the complete depletion of oil will be a reality in the near future. The stereotypes and information surrounding this depletion does not taken into consideration various other factors.

Thomas Malthus, stated that due to over population, the human race would soon run out of non-renewable resources, primarily oil. However, Malthus did not predict the mechanical advances in horticulture and nourishment creation (Sen, 1982).

The issue with worldwide statistics is that they are self-reported. They have therefore manipulated and overstated the amount of readily recoverable oil. Oil Manufacturing states may have certian reasons for representing inflated oil inventories, for example, as mentioned earlier, the Ramadan War was one occasion. OPEC is one of the best example of this. Proof of manipulation of reservoir value happened from 1988 to 1990, when the greater part of the OPEC countries increased their collected reported reserve by 77 per cent or 304 Billion Barrels (Gorelick, 2009).

Industries too take part in this exaggeration in order to gain a profit. For example, in 2004 the Royal Dutch Shell stated their preliminary succession of depletion of oil reserves. It reduced by about 23 per cent. Given the adverse consequence on the stockholders, the US Securities and Exchange Commission (SEC) threatened a suit. But, later in 2005, Shell acceded to a penalty of 120 million dollars to be paid to the SEC. Two issues arise here, one, how could oil reserves reduce by 23 per cent in the matter of a month? If they were undergoing a loss, how did Shell even manage to pay the penalty?

Further, several Industries prevent other oil producing industries from developing as they want to maintain monopoly. The industries even have ties with the Government to prevent other oil industries from developing. In India for example, The Reliance Industries Limited (RIL) purported to give up 25 per cent of the aggregate region outside the sightings in the KG Basin (Andhra Pradesh) in 2004 and 2005, according to the Production Sharing Contract (PSC)  (Times T. F., 2018). Be that as it may, the whole piece was proclaimed as a revelation zone and RIL was permitted to hold it (Times T. F., 2018). In 2011, the Controller and Auditor General of India (CAG) condemned the Oil Ministry for this choice (Times T. F., 2018). The CAG blamed RIL for constraining the opposition in contracts, expressing that RIL granted a $1.1 billion contract to Aker (A Norwegian Oil Company) on a single bid basis (Times T. F., 2018).

India primarily imports oil from Iraq. The main extract and product of oil is petroleum. Petroleum or petrol prices have increased steeply over the past decade. The main reason attributed by petrol manufacturing companies, is ironically the lack of petrol reserves and import tax. Just over 50 per cent of the price consumers pay for petrol is taxes that go to the centre and state (Gorelick, 2009). The tax rates imposed by the centre and state on the production and sale of petrol have risen over the last two years (Gorelick, 2009). But, have these taxes been put to good use? In 2016, there were allegations of a petrol scam worth 200,000 million but the public were unaware of it as it was not publicised. The Gujarat State Petroleum Corporation Ltd (GSPC), has perennially been into the mining of raw petroleum. Surprisingly, it had obtained 197,160 million until March 31, 2015 from in excess of 15 public and private segment banks together (Ramesh, 2018). Its profits have dropped to an insignificant 230 million in 2015 (Ramesh, 2018). The organization has discounted almost 300,000 million as investigation costs (Ramesh, 2018). The organization had premium duty of 180,000 million in 2015 alone to the banks  (Ramesh, 2018) .But none of the other debts were revived and the GSPC was not penalised (Ramesh, 2018).

These two examples are only refrained to India, worse scams happen in foreign countries. For example, the United States of America actually holds much more oil than Saudi Arabia and other military countries. Alaska is speculated to contain the largest oil reserves in the world. A new report from Rystad Energy appraises the U.S. to sit on a shocking 264 billion barrels of oil inventories. It incorporates oil in existing fields, new tasks, ongoing revelations and additionally, projections in unfamiliar fields (Egan, 2018). Therefore, it is likely that the US may be the primary producer of oil in the future further increasing their power in the world (Egan, 2018).

The greater part of America’s undiscovered oil is unique shale oil, as indicated by Rystad. Shale oil is the already inaccessible crude that, on account of fracking and new innovation, has reshaped the worldwide energy situation and vaulted the U.S. into the more elite class of worldwide oil makers (Egan, 2018).

What countries fail to implement is the lack of alternate resources to oil. One of the main alternatives is natural gas. The USGS 2000 assessment estimated global natural gas reserves at 15.4 quadrillion cubic feet which is equivalent in energy content to 2.6 trillion barrels of oil and in 2008 only 17 per cent of the global natural gas reserves were being used (Gorelick, 2009). Unlike oil where the Middle East accounts for 60 per cent of oil, it accounts 40 per cent of Natural gas (Gorelick, 2009). The USGS found that within the eight year period since its 2000 assessment, discoveries of natural gas had increased by only 10 per cent but reserves had grown by 51 per cent (Klett, 2005). But none of this is being used. Similar to natural gases there are several other alternatives.  Some well-known alternative oils include biodiesel, bio alcohol (methanol, ethanol, and butanol), refuse-derived fuel, chemically stored electricity (batteries and fuel cells), hydrogen, non-fossil methane, non-fossil natural gas, vegetable oil, propane and other biomass sources.

Conclusion:

In conclusion, while there are several sources that speculate the end of oil, it is not near to ending. Oil is going to exist for years to come and is not going to be extinguished. It is clear that most countries are focusing on alternative resources due to the pollute content of oil. For example, Japan has switched to electricity as it main source of energy. India following the same footsteps is also trying to do the same. But, unfortunately, most third world countries will still depend on oil and given the evidence of the US having large oil fields, the world better prepare for global domination of the United States of America.

Sources-

1. Malthus, T. R. (1798). An Essay on the Principle of Population, Oxford University Press, 13-14.
2. Sandrea, R. (2006). Early New Field Production Estimation could assist in Quantifying Supply Trends, Oil and Gas Journal.
3. Inspiration, A. (2018). Oil and natural gas depletion and our future – Resilience. Resilience. Retrieved 19 April 2018, from http://www.resilience.org/stories/2007-07-21/oil-and-natural-gas-depletion-and-our-future/
4. U.S. Energy Information Administration (EIA). (2011). Eia.gov. Retrieved 19 April 2018, from https://www.eia.gov/
5. Anon, (2012). OPEC Oil Embargo
6. USGS Releases Global Estimate for Undiscovered, Technically Recoverable Conventional Oil and Gas Resources. (2018). Doi.gov. Retrieved 19 April 2018, from https://www.doi.gov/news/pressreleases/USGS-Releases-Global-Estimate-for-Undiscovered-Technically-Recoverable-Conventional-Oil-and-Gas-Resources
7. Gorelick, S. (2011). Oil Panic and the Global Crisis. New York, NY: John Wiley & Sons, 125.
8. Reliance violated contract terms in KG Basin, finds CAG report. (2018). The Financial Express. Retrieved 19 April 2018, from http://www.financialexpress.com/archive/Reliance-violated-contract-terms-in-KG-Basin–finds-CAG-report/843940/
9. Ramesh, J. (2018). Opinion: On Modi’s Watch, 20,000 Crores Vanished. The Big “Gas Scam”. NDTV.com. Retrieved 19 April 2018, from https://www.ndtv.com/opinion/from-jairam-ramesh-7-questions-for-pm-modi-on-20-000-crore-scam-1404319

Ganesh Bhaskar Lata is a third year law student at Jindal Global University.

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