Sudden oil prices increased in 1973 (tripled) and 1979 (doubled) sent the major economies into recession. Many analysts warned that the world soon run out of oil. But their predictions were emotional and political reactions to the Arab countries. Furthermore, oil experts knew that they had no scientific basis at that time about how long the oil production would last.

The reports from oil industry boasted 1020 billion barrels of oil (Gbo) in "proved" reserves at the start of 1998. Dividing that figure by the current production rate of about 23.6 Gbo a year might suggest that crude oil could remain prentiful and cheap for 43 more years - probably longer, because more discoveries in recent years.

Unfortunately, this appraisal makes three critical errors which are:

• It relies on distorted estimates of reserves.
• It pretends that production will remain constant.
• More importantly, it assumes that the last bucket of oil can be pumped from the ground just as quickly as the current production rate.
• In practice, companies and countries are often deliberately vague about the likelihood of the reserves. Exaggerated estimates can, for instance, raise the price of an oil company's stock.
• The members of OPEC have faced an even greather temptation to inflate their reports because the higher their reserves, the more oil they are allowed to export.

So What's the True Numbers?

It's not easy to say the exact figures. The authors have spent time studying on a number of figures and statistics which I don't need to mention. But I would cut some statements which are interesting.