A Review of the New Undiscovered Conventional Crude Oil Resource Estimates and their Economic and Environmental Implications

WP 2001-22 December 2001Three new probalistic assessments of oil resources by the United States Geological Survey and the United States Minerals Management Service result in an expansion of global remaining conventional world oil resource estimates. The new value used here is 3.3 trillion barrels; the comparable earlier 1991 assessment was 2.1 trillion barrels. Using optimal control depletion theory, a global monopoly has theoretical net present value economic rent of $22 trillion, with supply-demand quantity equilibria peaking in about 85 years, then declining to exhaustion in 25-30 years. However, actual global markets (as distinct from theoretical markets) operate in a game theoretic framework. The Persian Gulf-OPEC team of exporters (accompanied by Norway and Mexico) faces the United States- Organization for Economic Co-operation and Development team of importers. The acceptable price range before September 11 was $23 - $30 per barrel. The Persian Gulf continues to be the major locus of world oil resources, and has production costs (including return on capital and a risk allowance) at $5 per barrel or les