Reserves vs. Resources

In 1980, the world had about 27 years of proved oil reserves at the consumption rate of that year. By 2023, despite 43 years of extraction, proved reserves had grown to represent about 50 years of current consumption. Oil did not regenerate underground. The definition of "reserves" changed.

Proved reserves are the subset of total resources that can be profitably extracted with current technology at current prices. Resources are the total amount of a substance that exists in the earth's crust, regardless of whether extraction is currently economical. When prices rise or technology improves, resources graduate into reserves. When prices fall, reserves can shrink even though the physical material is unchanged.

Visualize the relationship. Think of concentric circles. The inner circle is proved reserves (extractable, profitable today). The middle circle is contingent resources (known to exist but not yet economical). The outer circle is undiscovered resources (estimated by geological models).

Apply to oil sands. Alberta's oil sands (Athabasca, Cold Lake, and Peace River combined) contain roughly 166 billion barrels of proved reserves. When oil was $30/barrel, much of this was uneconomical (a resource, not a reserve). At $80/barrel, extraction is profitable and the material counts as proved reserves.

If oil prices drop to $40/barrel and stay there, what happens to Canada's proved reserve figure?

Reserves shrink on paper. The oil is physically unchanged, but the portion that counts as economically recoverable falls. Reserves are an economic classification, not a geological one.

Reserves-to-production (R/P) ratios are snapshots, not forecasts. Citing them as predictions of "when we run out" confuses a dynamic economic boundary with a fixed physical limit.

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