**2.1 Will fossil fuel reserves be effectively depleted by 2050?**

Crude oil, coal and gas are the main resources for world energy supply. The size of fossil fuel reserves and the dilemma that when non-renewable energy will be diminished, is a fundamental and doubtful question that needs to be answered. Here a new formula for calculating when fossil fuel reserves are likely to be depleted is presented along with an econometrics model to demonstrate the relationship between fossil fuel reserves and some main variables (*Shahriar Shafiee et.al. 2009*). The new formula is modified from the Klass model and thus assumes a continuous compound rate and computes fossil fuel reserve depletion times for oil, coal and gas of approximately 35, 107 and 37 years, respectively. This means that coal reserves are available up to 2112, and will be the only fossil fuel remaining after 2042.

In the Econometrics model, the main exogenous variables affecting oil, coal and gas reserve trends are their consumption and respective prices between 1980 and 2006. The models for oil and gas reserves unexpectedly show a positive and significant relationship with consumption, while presenting a negative and significant relationship with price. The econometrics model for coal reserves, however, expectedly illustrates a negative and significant relationship with consumption and a positive and significant relationship with price. Consequently, huge reserves of coal and low-level coal prices in comparison to oil and gas make coal one of the main energy substitutions for oil and gas in the future, under the assumption of coal as a clean energy source.

United States, Russia and China are leading producers and consumers of World Energy. These three countries together produced 31% and consumed 41% world total energy as per International Energy Agency (IEA) 1999. United Sates consumed three times the energy than China, the second largest consumer of World. Fossil fuels will remain the most important energy source, at least until 2030, and the use of oil, gas and coal is expected to grow in volume (IEA, 2009) over this period. Coal is not scarce, but is problematic for pollution and climate change reasons. The production costs of oil continue to rise with the expansion of the share of deepwater exploration in the supply (IEA, 2008). Although coal and gas are abundantly available, environmental and logistical reasons prevent a substantial shift away

Fossil fuel reserves are concentrated in a small number of countries. 80 % of the coal reserves are located in just six countries; the European Union (EU) has 4 % of the global stock. The EU share of the world's gas reserves decreased from 4.6 % in 1980 to 1.3 % in 2009. These reserves are expected to be exhausted before 2030. More than half of the global stock is found in only three countries: Iran, Qatar and Russia (24 % in 2009), which is a major gas supplier for the EU. Ten countries (of which eight are OPEC members) have 80 % of the world's oil reserves. Some of these countries may exercise their power to restrict supply or influence the price (NIC, 2008). EU dependence on imported fossil fuels is slowly rising and presently amounts to about 55 %. Some EU countries (for instance Estonia, Italy, France and Sweden) have sizeable oil shale stocks. Reduced foreign supply may encourage them to exploit these sources. The Arctic region is expected to contain a substantial amount of oil,

Crude oil, coal and gas are the main resources for world energy supply. The size of fossil fuel reserves and the dilemma that when non-renewable energy will be diminished, is a fundamental and doubtful question that needs to be answered. Here a new formula for calculating when fossil fuel reserves are likely to be depleted is presented along with an econometrics model to demonstrate the relationship between fossil fuel reserves and some main variables (*Shahriar Shafiee et.al. 2009*). The new formula is modified from the Klass model and thus assumes a continuous compound rate and computes fossil fuel reserve depletion times for oil, coal and gas of approximately 35, 107 and 37 years, respectively. This means that coal reserves are available up to 2112, and will be the only fossil fuel

In the Econometrics model, the main exogenous variables affecting oil, coal and gas reserve trends are their consumption and respective prices between 1980 and 2006. The models for oil and gas reserves unexpectedly show a positive and significant relationship with consumption, while presenting a negative and significant relationship with price. The econometrics model for coal reserves, however, expectedly illustrates a negative and significant relationship with consumption and a positive and significant relationship with price. Consequently, huge reserves of coal and low-level coal prices in comparison to oil and gas make coal one of the main energy substitutions for oil and gas in the future, under the

**2. Global trends of fossil fuel reserves** 

probably up to 90 billion barrels (EU: about 12 billion barrels).

**2.1 Will fossil fuel reserves be effectively depleted by 2050?** 

from oil to these energy sources.

remaining after 2042.

assumption of coal as a clean energy source.

Fossil fuels play a crucial role in the world energy market *(Goldemberg, 2006)*. The world's energy market worth around 1.5 trillion dollars is still dominated by fossil fuels. The World Energy Outlook (WEO) 2007 claims that energy generated from fossil fuels will remain the major source and is still expected to meet about 84% of energy demand in 2030. There is worldwide research into other reliable energy resources to replace fossil fuel, as they diminish; this is mainly being driven due to the uncertainty surrounding the future supply of fossil fuels. It is expected, however, that the global energy market will continue to depend on fossil fuels for at least the next few decades.

World oil resources are judged to be sufficient to meet the projected growth in demand until 2030, with output becoming more concentrated in Organization of Petroleum Exporting Countries on the assumption that the necessary investment is forthcoming IEA, 2007. According to WEO 2007 oil and gas supplies are estimated to escalate from 36 million barrels per day in 2006 to 46 million barrels per day in 2015, reaching 61 million barrels per day by 2030. In addition, oil and gas reserves are forecast at about 1300 billion barrels and 6100 trillion cubic feet in 2006, respectively (BP, 2007). The World Energy Council (WEC) in 2007 estimated recoverable coal reserves of around 850 billion tonne in 2006.

Table 1 shows the distribution of remaining reserves of fossil fuels. Firstly, as seen in Table 1, coal constitutes approximately 65% of the fossil fuel reserves in the world, with the remaining 35% being oil and gas. Secondly, while the size and location of reserves of oil and gas are limited in the Middle East, coal remains abundant and broadly distributed around the world. Economically recoverable reserves of coal are available in more than 70 countries worldwide and in each major world region. In other words, coal reserves are not limited to mainly one location, such as oil and gas in the Middle East. These two geological reasons support the fact that coal reserves have potential to be the dominant fossil fuel in the future.


[*Source*: WCI (2007) and BP (2006)]

Table 1. Location of the world's main fossil fuel reserves in 2006

Global Trends of Fossil Fuel Reserves and Climate Change in the 21st Century 171

Fig. 1. Trends of world crude oil proven reserves and oil consumption from 1980 to 2007.

Fig. 2. Trends of world coal proven reserves and coal consumption from 1987 to 2005.

Fig. 2 shows reserve versus consumption of coal. This graph shows a negative correlation between coal reserve and consumption. In spite of the fact that the data for coal were less available and more volatile in comparison to oil and gas, the relation between coal reserve and coal consumption is still negative and significant. According to *Shihab-Eldin (2004*), the increase in fossil fuel resources is due to the availability of improved data, as well as technological improvements. Consequently, the reserves of oil and gas have not shown any decreasing trend during the last couple of decades and predictions that they were about to run out are not substantiated *for the last 26 years (1980 to 2007) as seen from Fig. 1 and Fig. 3*.

[*Source*: EIA and BP]

[*Source*: EIA and BP]

Fossil fuel reserve trends tend to mainly depend on two important parameters: consumption and price. The Energy Information Administration (EIA) has projected that energy consumption will increase at an average rate of 1.1% per annum, from 500 quadrillion Btu in 2006 to 701.6 quadrillion Btu in 2030. Currently, the growth in world energy consumption is approximately 2% per annum. "In terms of global consumption, crude oil remains the most important primary fuel accounting for 36.4% of the world's primary energy consumption (without biomass)". The International Energy Agency (IEA) claims oil demand as the single largest consumable fossil fuel in the global energy market will fall from 35% to 32% by 2030. Coal is the second largest consumable fossil fuel relative to the three main fossil fuels; in part largely due to consumption over the past couple of years. According to WEO 2007, "coal is seen to have the biggest increase in demand in absolute terms, jumping by 73% between 2005 and 2030". "Coal accounted for about 28% of global primary energy consumption in 2005; surpassed only by crude oil" (BGR, 2007). Reserves of gas in comparison to oil and coal will moderately increase for the next two decades, from 21% to 22%. Although other energy resources are expanding in the world, the rate of fossil fuel consumption for energy will also continue to increase through to 2030.

The next important issue after global consumption of fossil fuels is fossil fuel price movement. Proven fossil fuel reserves will fluctuate according to economic conditions, especially fossil fuel prices. In other words, proven reserves will shrink when prices are too low for fossil fuels to be recovered economically and expand when prices deem fossil fuels economically recoverable. In addition, the trend of fossil fuel prices significantly affects fossil fuel consumption. On the other hand, fossil fuel price fluctuations affect other variables such as international inflation, global GDP growth, etc. Consequently, the size of fossil fuel reserves depends on their prices.

The oil price is currently very high at around \$140 per barrel in nominal terms. This is much higher than after several other oil price crises, such as the Iran/Iraq war, Gulf war and 9/11 as per WTRG, 2008. According to OPEC (2007), OPEC benchmark crude price is assumed to remain in the \$50 to \$60 per barrel range in nominal terms for much of the projected period and rising further in the longer term with inflation. Therefore, the oil price at the moment is much higher than the OPEC prediction. Moreover, WEC (2007) forecast the oil price based on the assumption that the average crude oil price will fall back from recent highs of over \$75 per barrel to around \$60 (in year 2006 dollars) by 2015 and then recover slowly, reaching \$62 (or \$108 in nominal terms) by 2030. Coal prices have had less fluctuation in comparison to oil in the last 50 years. The coal market depicts relatively constant coal prices in historical data. WEC (2007) assumes that this trend will remain flat until the middle of the next decade, then increase very slowly, reaching just over \$60 per tonne by 2030. Gas prices have generally followed the increase in oil prices since 2003, typically with a 1 year lag. Annual Energy Outlook 2007 predicted that the average transmission and distribution margin for delivered gas is projected to change from \$2.38 per thousand cubic feet in 2006 to between \$2.07 and \$2.44 per thousand cubic feet in 2030 (2005 dollars). As a result, forecasting fossil fuel prices are uncertain and unpredictable.

### **2.2 Fossil fuel reserve versus consumption**

The trends of fossil fuel reserves versus consumption are discussed. As can be seen from Fig.1, the trend of oil and gas reserves with their consumption increased. This means that reserve and consumption for oil and gas over the last 26 years have an unusual positive correlation.

Fossil fuel reserve trends tend to mainly depend on two important parameters: consumption and price. The Energy Information Administration (EIA) has projected that energy consumption will increase at an average rate of 1.1% per annum, from 500 quadrillion Btu in 2006 to 701.6 quadrillion Btu in 2030. Currently, the growth in world energy consumption is approximately 2% per annum. "In terms of global consumption, crude oil remains the most important primary fuel accounting for 36.4% of the world's primary energy consumption (without biomass)". The International Energy Agency (IEA) claims oil demand as the single largest consumable fossil fuel in the global energy market will fall from 35% to 32% by 2030. Coal is the second largest consumable fossil fuel relative to the three main fossil fuels; in part largely due to consumption over the past couple of years. According to WEO 2007, "coal is seen to have the biggest increase in demand in absolute terms, jumping by 73% between 2005 and 2030". "Coal accounted for about 28% of global primary energy consumption in 2005; surpassed only by crude oil" (BGR, 2007). Reserves of gas in comparison to oil and coal will moderately increase for the next two decades, from 21% to 22%. Although other energy resources are expanding in the world, the rate of fossil fuel consumption for energy will also continue to increase through to 2030.

The next important issue after global consumption of fossil fuels is fossil fuel price movement. Proven fossil fuel reserves will fluctuate according to economic conditions, especially fossil fuel prices. In other words, proven reserves will shrink when prices are too low for fossil fuels to be recovered economically and expand when prices deem fossil fuels economically recoverable. In addition, the trend of fossil fuel prices significantly affects fossil fuel consumption. On the other hand, fossil fuel price fluctuations affect other variables such as international inflation, global GDP growth, etc. Consequently, the size of

The oil price is currently very high at around \$140 per barrel in nominal terms. This is much higher than after several other oil price crises, such as the Iran/Iraq war, Gulf war and 9/11 as per WTRG, 2008. According to OPEC (2007), OPEC benchmark crude price is assumed to remain in the \$50 to \$60 per barrel range in nominal terms for much of the projected period and rising further in the longer term with inflation. Therefore, the oil price at the moment is much higher than the OPEC prediction. Moreover, WEC (2007) forecast the oil price based on the assumption that the average crude oil price will fall back from recent highs of over \$75 per barrel to around \$60 (in year 2006 dollars) by 2015 and then recover slowly, reaching \$62 (or \$108 in nominal terms) by 2030. Coal prices have had less fluctuation in comparison to oil in the last 50 years. The coal market depicts relatively constant coal prices in historical data. WEC (2007) assumes that this trend will remain flat until the middle of the next decade, then increase very slowly, reaching just over \$60 per tonne by 2030. Gas prices have generally followed the increase in oil prices since 2003, typically with a 1 year lag. Annual Energy Outlook 2007 predicted that the average transmission and distribution margin for delivered gas is projected to change from \$2.38 per thousand cubic feet in 2006 to between \$2.07 and \$2.44 per thousand cubic feet in 2030 (2005 dollars). As a result, forecasting fossil fuel prices are uncertain and unpredictable.

The trends of fossil fuel reserves versus consumption are discussed. As can be seen from Fig.1, the trend of oil and gas reserves with their consumption increased. This means that reserve and consumption for oil and gas over the last 26 years have an unusual positive correlation.

fossil fuel reserves depends on their prices.

**2.2 Fossil fuel reserve versus consumption** 

Fig. 1. Trends of world crude oil proven reserves and oil consumption from 1980 to 2007. [*Source*: EIA and BP]

Fig. 2. Trends of world coal proven reserves and coal consumption from 1987 to 2005. [*Source*: EIA and BP]

Fig. 2 shows reserve versus consumption of coal. This graph shows a negative correlation between coal reserve and consumption. In spite of the fact that the data for coal were less available and more volatile in comparison to oil and gas, the relation between coal reserve and coal consumption is still negative and significant. According to *Shihab-Eldin (2004*), the increase in fossil fuel resources is due to the availability of improved data, as well as technological improvements. Consequently, the reserves of oil and gas have not shown any decreasing trend during the last couple of decades and predictions that they were about to run out are not substantiated *for the last 26 years (1980 to 2007) as seen from Fig. 1 and Fig. 3*.

Global Trends of Fossil Fuel Reserves and Climate Change in the 21st Century 173

availability than oil and gas. This means that the coal reserves will be available until at least 2112 at this rate, and it will be the single fossil fuel in the world as indicated in Table 2.

The second method tries to calculate the time that fossil fuels will be depleted by computing ratio of consumption to reserves. Thus, the average ratios of world consumption to reserves for oil, coal and gas can be computed from Fig. 1, Fig. 2 and Fig. 3.The graphs Fig.4, shows the trend of ratio of world consumption to reserves for oil, coal

Fig. 4. The ratios of world consumption to reserves for oil, coal and gas from 1980 to 2006.

rates, their reserves will last a further 40, 200 and 70 years, respectively.

**3. Nature of global warming and climate change** 

can affect weather in various ways, as shown below.

As can be seen in this figure these ratios for oil and gas were constant, around 40 and 60 years, respectively. This means that during the last 26 years, the reserves of oil and gas have not shown any decreasing trend during the last couple of decades and predictions that they were about to run out are not substantiated for the last 26 years (1980 to 2007) as seen from Fig. *1 and Fig. 3*. This means that if the world continues to consume oil, coal and gas at 2006

Global warming and climate change refer to an increase in average global temperatures. Natural events and human activities are believed to be contributing to an increase in average global temperatures. This is caused primarily by increases in "greenhouse" gases such as Carbon Dioxide (CO2).A warming planet thus leads to a change in climate which

Fossil fuel reserves depletion times after 2042.

and gas from 1980 to 2006.

Fig. 3. Trends of world natural gas proven reserves and gas consumption from 1980 to 2007. [*Source*: EIA and BP]
