1. Introduction

The turmoil currently engulfing the Arab world causing oil prices to soar has once again brought the thorny issue of the global dependence on Arab oil to the forefront of news bulletins and newspapers worldwide. The continuous blitz by the “experts” warning of imminent energy shortages, chiefly the scaremongers advocating looming “peak oil” where the world will be running out of oil, has lead the public globally to unequivocally be persuaded that the Arab world^[1] is an indispensable energy source without which civilisation will come to a halt and collapse. This perspective is often used as a pretext to justify continuous political and military meddling in the Arab world’s affairs. It has repeatedly been used by “democratic” western leaders to defend their support of autocratic and authoritarian Arab governments to stay in power. This attitude appears to be changing on the surface due to the Arab uprisings of 2011, yet in reality, it is still being maintained, though cautiously discreet. But is the world really this vulnerable? And does civilisation rely for its energy supplies on what happens in one unstable region in the world?

To answer the above questions, this article is informed by hard facts and follows a clear approach based on scrutinizing the numbers rather than accepting the propaganda that often has no basis. As such, the four steps outlined below are crucial to establish a roadmap of thinking leading to clear conclusions:

1. Incorporating fossil fuels as a whole, i.e. oil, natural gas and coal, which constitute the overwhelming majority of the world’s energy needs. This means that we have to widen the data review beyond oil to include natural gas and coal, since the three fuel types are technically convertible. Accordingly, it is crucial to inspect them comprehensively.
2. Embracing unconventional forms of fossil fuels, which continue to be gradually reclassified over time into conventional due to improving technology, which renders them economically feasible. These include extra heavy oil, tar sands (bitumen), oil shale, shale gas, tight gas, coalbed methane, geopressurized and hydropressurised gas, methane hydrate and peat.
3. Attaining an unambiguous and basic understanding of the terminology and concepts of fossil fuels, distinguishing fuel types and clarifying the jargon, in particular, the distinction between the terms “reserves” and “resources”.
4. Assessing impartially fossil fuels statistics in the Arab world and their contribution to the global picture. This assessment must rely on credible and comprehensive sources of data included where not only the accuracy and reliability of the data is important, but also the motivation and objectivity of its providers.

This article implements this road map and equips us to obtain a clear insight and an informed opinion, which allows us to differentiate facts from fiction when reading and interpreting data about this subject.

2. What everyone should know about global energy?

The statement the Arab world is home to almost two-thirds of the world’s oil reserves is repeated endlessly to the extent that it appears to be on auto-repeat. But how accurate is this statement and other claims relating to oil and natural gas in the Arab world? One way to know is to read the facts below, which may appear “academic” to some, but without them, we will never know the answers. These facts are presented below as a summary describing the status of oil, natural gas, and coal, in terms of four categories (reserves and resources; production; consumption and trade). To simplify the delivery, the analysis is performed consistently, where a global viewpoint is initially presented, and then we zoom in the Arab world to gauge its contribution.

To facilitate direct comparison between oil, natural gas and coal, a standardised energy unit must be used. Here, we report the overall fossil fuels numbers in terms of barrel oil equivalent (boe), which is widely used as a standard measure in the energy industry in financial reporting as a way of combining oil, natural gas and coal reserves and production into a single measure based on the approximate energy released by burning one barrel of crude oil.

2.1. Reserves & Resources

To quantify how much oil, natural gas and coal there is, we need to clearly differentiate between two important terms, “reserve” and “resource”, whose use is often mixed up in the media and where a lot of confusion exists regarding the meaning of each term. Simply, “resource” is an inclusive term that encompasses “reserve”, so that a reserve constitutes a part of the total resource.

Like other commodities, overall resources of fossil fuels are finite; this quantity is often referred to as “Original-in-place”. Cumulative production is the quantity of these overall resources that has been recovered up to a given date. The remaining resources are either “recoverable” or “unrecoverable”. These remaining recoverable resources are either discovered or undiscovered. The discovered resources are either commercial or sub-commercial. These commercial discovered resources are what is labelled as “reserves“, which are defined as quantities of fossil fuels that are discovered, remaining in the ground awaiting production, recoverable and commercial.

These reserves are classified as proven, probable or possible reserves, in accordance with the level of uncertainty associated with their potential recovery due to both current feasibility and technology. This means that without further discovery, advances in technology will certainly increase the reserves, while changing economic conditions can either increase or decrease the reserves.

In a nutshell, the numbers tell us that the world has plentiful reserves and resources of oil, natural gas and coal. These quantities are summarised in Table 1 below, which reports overall fossil fuels reserves and resources, taking into consideration both conventional and unconventional deposits. The latter cannot be dismissed anymore. While unconventional deposits have been ignored in the past, there is an unstoppable trend of unconventional resources are being reclassified as conventional reserves, leading to their production becoming a vital contribution to quenching the world’s thirst for fossil fuels. Contrary to the general belief, Table 1 reveals that foil, far from being the dominant fossil fuel, fact ranks last when measured against other types of fossil fuels.

Table 1: Analysis of global fossil fuel resources and reserves in billion barrel or boe (2009)

Even if we narrow our focus to conventional reserves only, to the surprise of many, oil does not become the dominant fossil fuel globally. The actual dominant fossil fuel, coal, accounts for over 55.5% of the total reserves, whereas oil and natural gas contribute only 22.2% each.

Looking at a country level, we note that major world energy heavy-weights are in fact the world’s major political and military powers: the USA, Russia and China with 17.2%, 17.6% and 7.6% of the conventional reserves respectively.

You may be all asking now, what about Saudi Arabia? The country often portrayed as the world’s energy giant? The actual unexpected truth is that it ranks only fifth globally with barely 6% of the conventional fossil fuel reserves. It is not even the home of the largest reserves in either OPEC or the Middle East, but ranks behind Iran, whose reserves account for 6.2%. However, if the 22 countries comprising the Arab world are considered as one entity, this entity will rank top in terms of conventional fossil fuels reserves, with a share totalling 19.5% – a far cry from the two thirds (67%) number often cited. While this combined share positions the Arab world as a major energy player, as far as fossil fuels reserves are concerned, it is now only one of three players of comparable strength. It is evident that the Arab world’s power is significantly reduced, since its domination actually only applies to conventional oil reserves, where its share is 57.7%. Interestingly, the Arab world’s share of the world’s fossil fuels reserves and resources is even smaller when unconventional deposits are included, and when we examine not only reserves, but rather recoverable resources. The numbers are presented in Table 2 for all to observe.

Table 2: Analysis of Arab world’s share of global fossil fuel resources and reserves in billion barrel or boe (2009)

2.2. Production

Despite oil being ranked last in terms of global fossil fuels resources, it contributes the largest proportion of their production accounting for 41.0%. Coal, which lost its dominant position in 1950s, is still a significant contributor, where it currently accounts for 31.3% of the total production. However, natural gas is growing rapidly and now accounts for 27.7% of the total production.

Since oil continues to supply the largest proportion of global energy needs and with demand projected to continue growing, there is a concentrated drive to use more advanced technology to expand oil production. This includes innovative enhanced oil recovery (EOR) methods to extract more oil from known reserves, development of unconventional oil deposits, and expansion of natural gas liquids (NGLs) production. In addition, extensive research is being conducted to commercially develop conversion processes of coal-to-liquid (CTL) and gas-to-liquid (GTL) as substitutes to dwindling conventional oil production. Keep in mind also that the majority of biofuels produced are in the form of liquid fuels that are designed to blend with oil to extend the oil age.

At a country level, the same three energy heavyweights: the USA, Russia and China are the top three producers, with 14.0%, 12.2% and 14.9% of the total production respectively.

On the Arab level, Saudi Arabia is the top fossil fuel producer, with its share of 5.9% placing its fourth globally. However, if the Arab world is considered as one entity, this entity will be ranked as the top producer with 16.9% of the world’s overall production. This indicates that the Arab world is now only one of four major producers of comparable size. Thus its perceived dominance is untrue.

2.3. Consumption

As expected, oil, coal and natural gas consumption mirrors their production, where they account for 41.5%, 27.6% and 30.9% respectively. These numbers highlight the current dependence of the world on oil to provide the largest proportion of its energy needs, which is still showing no signs of diminishing, and is not expected to change soon.

At a country level, once again, the same three energy heavyweights: the USA, Russia and China are ranked top, with 20.0%, 6.7% and 16.6% of the total consumption respectively.

On the Arab level, Saudi Arabia is the top consumer, with its share just under 1.9% placing its tenth globally, one place behind Iran. In fact, the combined Arab world only accounts for 5.6% of global fossil fuels consumption. So if taken as one entity it ranks fourth globally just ahead of India. This explains the reason why the Arab world can punch above its weight in the energy markets. Its fossil fuels consumption is far below that of the major two consumers, thus it possesses the much needed excess fossil fuels production to supply the energy markets.

2.4. Net Exports & Imports

Due to logistical and technical constraints, oil is the dominant traded fossil fuel with 66.9% and 67.8% of global exports and imports respectively. Note that the slight differences are attributed to bunkering and storage.  Natural gas trade comes a distant second with a share of only 21.2% and 21.0% of the total net exports and imports, while coal accounts for a mere 11.9% and 11.2% of net exports and imports correspondingly. These numbers emphasize the dependence of the world on oil by illustrating clearly that oil is still the dominant form of energy traded on the international markets, unlike the situation with resources and reserves, production or consumption, where the three fossil fuel types’ contributions are more evenly spread.

It is necessary to avoid over or underestimation of net fossil fuels exports and imports if a country is a net exporter of one type of fuel, but a net importer of another. To illustrate, by considering the UAE as an example, where the country is a net oil exporter, but at the same time is a net natural gas importer. Thus summing the exports only will overestimate its net exports, while summing the imports will place it incorrectly as a net importer. In reality, the country is a net fossil fuel exporter but with lower overall net exports that takes the natural gas imports into account. Therefore, net value for exports and imports for fossil fuels is calculated as the difference between the sum of combined fossil fuels production and consumption, rather than aggregating the net exports or net imports of the three fossil fuels types.

On a country level, the picture differs from reserves, production or consumption, where the familiar three heavyweights are now in opposing camps. Both the USA and China are the leading net importers with 19.5% and 5.8% respectively, where they are ranked first and fourth globally, with Japan (12.6%) and Germany (6.7%) ranked ahead of China. On the other hand, Russia is the leading net exporter, with its share of 17.3% of global net exports.

Saudi Arabia is the leading Arab net fossil fuel exporter, and with its global share of 13.1%, is ranked second behind Russia. It contributes over a third of the Arab world’s share, whose combined share reaches a massive 36.6% of the net exports, while the Arab world’s share, in terms of net fossil fuels imports, is zero. These trade numbers demonstrate the real power the Arab world enjoys that allows it to remain as a major player in energy markets, where its share is more than double the second-placed exporting country, Russia. However, despite this apparent strength, the Arab world’s capability in influencing the world’s major powers is limited as its trading partners are not necessarily the most powerful countries.

3. Exposing the Myths

The discussion is expanded here to expose a few famous, widely believed, myths often reported. Having established the facts above, the myths are exposed using all the numerical data that give a quantitative outline of fossil fuels both globally and from an Arab perspective.

3.1. Myth 1: We are running out of oil, or as some peak oil advocates recently extend it, of all fossil fuels

The Stone Age did not finish because we ran out of stones and the hydrocarbon age will not end because we run out of hydrocarbons. The arguments regarding peak oil (i.e. we are running out of oil) are exaggerated and, as shown in Table 1, the world is awash with fossil fuels. Simple arithmetic shows that humanity consumed a mere 6.8%, 0.1% and 1.3% of oil, natural gas, and coal ‘originally-in-place’ respectively. In other words 93.2%, 99.9% and 98.7% of oil, natural gas and coal remain. Therefore it is obvious to all, that the fossil fuel endowment is plenty and will last for centuries. Furthermore, they will continue to be the primary energy sources, with the unconventional deposits becoming increasingly important.

However, let’s be clear! With demand projected to continue increasing, there is no argument that the era of easy and cheap oil specifically or easy and cheap fossil fuels generally, has come to an end. The last days of cheap oil are imminent if not already gone, with most of the remaining fossil fuels resources requiring more investment to extract and thus are more expensive to produce.

3.2. Myth 2: Technology does not enhance fossil fuels availability

Technology is playing an increasingly vital role in increasing the size of fossil fuel reserves, as it enables the industry to squeeze more oil and gas from reservoirs and even to mine coal from offshore reservoirs. While technology cannot alter the geology of the reservoirs, it improves recovery factors. Furthermore, technology reduces costs when its use becomes widespread and thus increases the size of the reported reserves.

Contrary to the blitz of publicity crying wolf, “the world has not discovered new fossil fuel fields and that the industry is depleting what is already there”, the truth is that most of the world’s fossil fuel production is coming from already mature fields, with technical advancements extending the fields’ life significantly. To put this in perspective the Society of Petroleum Engineers (SPE) reported that while in the 1960s 50-60% of oil and gas produced came from new fields, this share declined to 12-15% in 2009 and is projected to decline further to 7-10% in the future. Thus the incentive for finding new fields is not urgent.

It is irrefutable that technological advancement has brought numerous unconventional resources into play; with the growing importance of shale gas as just one example. It is not a question anymore of “if” but rather a question of “when” technology will enhance the availability of fossil fuels. It is a matter of time when oil shale, gas hydrates and coal in-situ gasification will join the energy mix.

3.3. Myth 3: The Arab world is home to two-thirds of the world’s oil reserves, and thus its oil is indispensable to the world

It is a known fact that the Arab world is underexplored in terms of fossil fuels and thus more resources will be identified in due course, especially unconventional resources. However, even taking this into consideration, the share of the Arab world’s fossil fuels is grossly under the two-thirds (67%) global reserves tag reported by the media. The numbers presented in Table 2 speak for themselves, demonstrating the overall share of fossil fuels of the Arab world is a fraction of what we are led to believe standing at only 15.0% and 7.9% of remaining reserves and resources respectively. The ‘real’ picture is that the Arab world is not the dominant force after all. Its influence in energy markets is similar to that of Russia or the USA, thus not as vital as the propaganda suggests.

3.4. Myth 4: OPEC and both national and international oil and gas companies control oil price

The price of fossil fuels is determined by many factors, chiefly the fundamental market dynamics of supply and demand. In addition, many factors play major roles in influencing the price. These include global political instability; producing countries internal political states of affairs, which may lead to disruption in supply due to local unrest, protectionism, and nationalisation; global economic instability; market speculators; local energy subsidies to stem public dissatisfaction; natural disasters, environmental incidents; etc. Thus it is clear that fossil fuels pricing is extremely complicated and cannot be manipulated by companies or cartels.

To illustrate the effect of just one of the above factors that, besides market forces, note that most conventional oil and natural gas reserves are located in politically unstable countries, where the political situation plays a key role in determining the oil and natural gas price. This far outweighs market fundamental factors. Examples of this political role in the last decade include the insurgency in Iraq, the unrest in Nigeria, the nationalisation of oil and gas industry in Venezuela, the state interference in Russia, and currently the uprisings in the Middle East, etc.

More recently, if the relatively high oil prices trend continues, there may be significant consequences for the oil industry with more oil reserves becoming feasible, being developed and coming online. This will have an adverse effect on the price of oil in the longer term.

3.5. Myth 5: The USA is dependent on Arab oil

It is totally untrue that the USA depends on the Arab world to secure its oil and gas supplies. In fact, it imports only a small fraction of its oil from the Arab countries, and since the Iranian revolution, its reliance on the Middle East as a whole declined as it stopped importing Iranian oil.

It is true that the USA is dependent on imported oil for over 60% of its oil needs. However, its dependence is considerably lower in terms of natural gas. It is, in fact, a net coal exporter. In addition, projections for future dependency show that the USA’s reliance on foreign fossil fuels is declining, with a higher percentage coming from its domestic supply.

The truth of the matter that many of the USA allies, especially in Asia, depend fully on Middle Eastern or Arab oil and natural gas, thus cynics may suggest that the desire of the USA to control energy resources in the Middle East is a ploy to indirectly keep a firm grip on its own allies. And preserve the value of its own fossil fuel reserves.

3.6. Myth 6: Energy independence is possible

To illustrate the concepts above, consider that, for example, while it may be possible for the USA to mine its coal resources or extract its oil shale at high costs and incalculable environmental costs, it may be cheaper in many instances to fulfil its energy needs by imports sacrificing energy independence.

We live in a global economy where trade is the essence of our way of life. Thus, for nations to aspire to achieve energy independence runs in contrast to this new way of life, the principles of free trade and global integration. What matters now for most governments is to guarantee the security of energy supply, to optimise and reduce energy costs rather than obtain energy at any cost and to reduce the adverse environmental effects of energy production and consumption. Consequently, for most governments, the emphasis nowadays is to drop the rhetoric of energy independence and concentrate instead on achieving security of energy supply, strengthening international energy trade and investment, encourage energy sources diversification, curb energy usage and increase energy efficiency.

3.7. Myth 7: Alternative energy can replace fossil fuels

At the moment fossil fuels contribute over 80% of global energy supply. Alternative energy will not be able to replace fossil fuels in the near or medium-term future. According to the International Energy Agency (IEA), the share of all types of alternative energy combined will hardly change and only manage to supply approximately 20% of the world’s energy by 2030, with is made up of  10% biomass (including biofuels); 6% nuclear; 2% hydro; 2% other renewables. No doubt it will contribute to reducing the world’s reliance on fossil fuels but, without a total change in policy and attitude, the goal of reducing the dependence on fossil fuels remains elusive.

4. Questions For Thought

After debunking seven of the most well-publicised myths, it is now fitting to raise a few questions for consideration, so the readers can reflect on what they have read and try to figure out their own answers. The questions raised are:

• What is the reason of the world’s obsession with the Arab world in general and Arab oil in particular?
• Why keep unpopular corrupt Arab regimes in power?
• Why invade Iraq to replace a tyrant with a failed state?
• Who benefits from high fossil fuel prices? Are they the current producers or the countries with unconventional deposits?
• Why promote expensive alternative energy rather than energy efficiency and energy economising via legislation?
• Who benefits from concealing the facts and promoting the myths and the fiction?
• What is the hidden agenda?

These questions will not be answered explicitly here, but my hint to guide readers to the answer, is the word ‘Politics’.