The oil industry was on a hot streak in 2009, making more than 200 discoveries on five continents.Â
On its face, that certainly seems like good news.
For example, a new field found in Uganda last year is anticipated to yield two billion barrels of oil.
It was referred to as "unquestionably the largest onshore discovery made in sub-Saharan Africa in at least 20 years.â€
And the Jubilee oil field, discovered off the coast of Ghana, is estimated to hold between 650 million and 2 billion barrels of recoverable oil. The find was viewed as so important that Exxon put up $4 billion for a stake in the field, the oil giant's biggest investment in a decade.
And last September, oil was discovered in the deep waters off the coast of West African nation of Sierra Leone. It is believed that more oil fields are yet to be discovered and developed of the West African coast, perhaps yielding as much as one billion barrels.Â
Advances in drilling technologies and exploration strategies are allowing for the discovery and extraction of deep water oil that would have previously been unrecoverable. Twenty-five years ago, oil companies struggled to operate in seas deeper than 600 feet. Now technological innovations mean they can pump crude in waters 6,000 feet deep.
But, as difficult as it is to get to oil as these depths, the rising price of oil and diminishing onshore oil fields have made it worthwhile and cost-effective to go after deep-water oil. That said, these oil fields are still extremely expensive to develop.Â
But the most striking elements of these finds â€” cumulatively totaling five billion barrels of oil â€” is this: the U.S. alone uses 21 million barrels of oil every day. That amounts to 7.7 billion barrels annually. And U.S. oil consumption has been rising at about two percent annually.Â
And, as a whole, the world uses 85 million barrels of oil daily.
The point is, despite the seemingly good news, the latest finds amount to spit in the bucket. In no way will they make an appreciable difference in the supply/demand ratio.
Recent oil discoveries have been far too small to offset the world's growing population and rising demand for oil.Â
Just this week, Dubai excitedly announced the discovery of a new offshore oil field, though its size was not revealed. The UAE sits on the worldâ€™s fifth largest proven oil reserves, amounting to 97.8 billion barrels of crude oil. But, according to the UAE government website, Dubaiâ€™s oil reserves, mostly offshore, are expected to be exhausted within 20 years.
Dalton Garis, of the Abu Dhabi-based Petroleum Institute, warned of the possibility that "prices would have to go above 80 or 90 dollars a barrel for [the newly discovered field] to be commercially viable."
And last month, a new pool of oil was discovered in southern Egypt that is proving to be more productive than the currently producing zones. The new discovery has a natural flow to surface rate of 220 barrels of oil per day; with artificial lifting, the maximum rate is 1300 barrels per day. That's all, and it's more productive that currently producing zones. You get the picture.
New oil discoveries totaled about 10 billion barrels in the first half of 2009, according to IHS Cambridge Energy Research Associates. It was quite a pace, as the industry desperately seeks new discoveries in an attempt to keep up with peaking oil fields and rising world demand.
That's why oil companies are searching beneath the ocean floor, even though drilling and extracting are much more difficult and expensive there. With oil currently at $71 per barrel, the price makes such difficult exploration feasible. Some deepwater wells can cost up to $100 million, yet only 30 to 50 percent of exploration wells find oil.
That leaves us in quite the conundrum; we need high oil prices for the industry to maintain deep-water exploration. And if the price falls due to the weak economy and a slumping demand, then exploration will cease, resulting in diminished supplies and higher prices in the future.
The chief executive of the French oil giant Total and the secretary general of OPEC have expressed exactly these concerns.
Ultimately, the recent discoveries do not come close to matching the massive discoveries of previous decades. The last truly substantial discovery was the Kashagan field in the Caspian Sea, which was discovered in 2000. It is estimated to hold over 20 billion barrels of oil.
To put that in perspective, last year the global rate of oil consumption reached 31 billion barrels.Â
Despite the fact that more than 10 billion barrels worth of oil were discovered last year, the industry's recovery rate â€” the share of oil that gets pumped out â€” averages just 30 to 35 percent.
The best hope is this: Shell Oil estimates that 300 billion barrels â€” and maybe more â€” might be squeezed out of existing fields, much of it once thought beyond retrieval.Â
And Peter Jackson of Cambridge Energy Research, has reviewed data from the world's biggest fields and concludes that 60 percent of their reserves remain available. It would be nice if he's right.
Otherwise, the world will need to focus on conservation, efficiency, and alternatives such as natural gas, wind, solar, and advanced battery technology.
One of the ironic outcomes of the Great Recession is this: U.S. oil consumption dropped by 9 percent over the last two years. That may be the only good news resulting from our economic malaise, but it is something we'd be hard pressed to continue hoping for.
Sean Kennedy is a journalist and the author of"The Independent Report," a non-partisan, non-ideological analysis of economic news, fiscal and monetary policy, inflation, the national debt, energy issues and other market events.
Follow him at http://twitter.com/IndyReport