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Economics of Oil, Gas and Energy

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1. Can discoveries continue to keep up with depletion? Why or why not? If so, for how long?
2. Is OPEC's power likely to increase, decrease, or stay the same? Why?
3. Saudi oil reserves are enormous. Do you anticipate Saudi Arabia will significantly expand its oil production capacity? Why or why not?
(please with references)

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Solution Summary

This solution examines whether oil and gas discoveries can continue to keep up with depletion. The solution also assess whether OPEC's power is likely to increase, decrease, or stay the same. Lastly, the solution examines the likelihood of Saudi Arabia increasing its oil production capacity.

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(1) Whether discoveries can continue to keep up with depletion
Global oil consumption has risen gradually over the last 10 years. The global oil consumption was about 30.3 billion barrels in 2004, but at the end of 2013 this figure had increased to about 33.3 billion barrels. Between 2004 and 2006, the global consumption of oil was higher than new discoveries. During this three-year period, the rate of consumption exceeded the rate of new discoveries by 62.4 billion barrels (BP, 2014).

The period between 2007 and 2011 saw a significant increase in new oil discoveries. A total of 298.8 billion barrels of oil were discovered during this 5-year period. In comparison, a total of 158.4 billion barrels of oil were consumed globally. These figures reveal that new oil discoveries have kept up with depletion in the last decade. In fact, ...

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