Regardless of whether the peak has or has not been reached, oil and natural gas are an indispensable source of the world’s energy and petrochemical feedstocks and will be for many years to come. The difficulty in determining oil and gas reserves is that “true reserves” are a complex combination of technology, price, and politics.
While technical change continues to reveal new sources of oil and gas, prices have demonstrated more volatility than ever, and governments have sought more control over resource information and access than ever. As prices rise, reserves once considered noneconomic to develop may become feasible. Crude oil prices ranged between $2.50 and $3.00 per barrel from 1948 through the end of the 1960s.
The Arab oil embargo of 1974 resulted in a large price increase. Events in Iran and Iraq led to another round of crude oil price increases in 1979 and 1980. The 1990s saw another spike in prices that ended with the 1997 Asian financial crisis. Prices then started back up, only to fall after September 11, 2001. After 9/11, prices rose until the recession at the end of the decade. Discovering new oil and gas reserves is the lifeblood of the industry.
Without new reserves to replace oil and gas production, the industry would die. However, measuring and valuing reserves is a scientific and business challenge because reserves can only be measured if they have value in the marketplace.