Bullish on Oil for the long-term (10 years)

Some key points:

1. Oil is currently a cheap source of energy (ie power)
The amount of energy available from oil, and what you can do with this energy, are cheap relative to other forms of energy sources (coal, horses, human power).

From a post from Gregor.us ($34.00 was the price of the barrel of oil at the time of the post):

"34.00 dollars buys you 1700 kw hours of power"

2. Oil supply is finite

2.1 Oil left in 2004

-> From the CRB Commodity Yearbook 2005, I get the following data:

"The world has produced approximately 650 billion barrels of oil, but another trillion barrels of proved reserves have yet to be extracted."

2.2 Oil left in January 2009 - estimation

Considering the oil consumption of about 30 billion barrels per year since 2004, the updated figures would be:

- amount of already consumed oil: 770 billion barrels,
- amount of proved reserves still to be extracted: 880 billion barrels

Considering a flat consumption of 30 billion barrels per year, this would mean we have 30 years left of oil.

This is clearly a very rough approximation, but considering all the unknowns (global economic slowdown in 2009 and forward, China economic growth, India economic growth, etc), there is no way anybody can claim much accuracy on such forecast.

From wikipedia page on Petroleum:

"At current consumption levels, and assuming that oil will be consumed only from reservoirs, known recoverable reserves would be gone around 2039, potentially leading to a global energy crisis."

2.3 Oil left in January 2019 - estimation
Now, let´s see the picture in 10 years:

Considering the oil consumption of about 30 billion barrels per year since 2009, the updated figures would be:

- amount of already consumed oil: 1070 billion barrels,
- amount of proved reserves still to be extracted: 580 billion barrels

Considering a flat consumption of 30 billion barrels per year, this would mean we would have at that point 20 years left of oil.



3. More people, less oil
Consider the following data:

Year World population Barrels of oil left Number of years of reserve left
2004 6.3 billions 1000 billions 34
2009 6.7 billions 880 billions 30
2019 7.0 billions 580 billions 20

Assumptions:
- consumption stable at 30 billion barrels per day,
- world population growth of 1.3% per year;

With such kind of assumptions, you can rapidly draw a graph that looks like this:



Now at which point are people going to panic ?

Imagine it is 2019, you are 30 years old, and you have a family with 2 kids. There are about 7 billion people on the planet; but only about 550 billion barrels of oil left (only half what there was in 2004). You hope you will live until 80 years old, and you children will live also until they are 80 years old. Now it becomes a certainty that you and your children will live through the end of the proved reserves of oil. What do you do? Are you going to buy some oil to secure your family's share of oil? Or will you wait?

Imagine you wait.
It's now 2025. There are 8.4 billion people on the planet, and only 370 billion barrels of oil left, which is enough for just the next 12 years. What do you do then? Can you afford as much oil as you could in 2019?