Oil Prices: Same As 200 Apples And Googles Going Bust

Wednesday, February 10, 2016             Comments

NO less than $119 trillion (or $119,000 billion) has been wiped off the value of the world's proven oil reserves.

YES, that's right, if you look at the data on proven oil reserves in the CIA factbook, as John Mauldin did to verify calculations originally made by David Aron Levine, this is the number that they both came up with. This is based on 170 trillion bbls of proven reserves and assuming a price decline from $100/bbl to $30/bbl, for the sake of argument.

Humans struggle to get their hands around such vast numbers. This morning I am for example floundering to get my head around the discovery of hundreds of previously unknown galaxies that were hidden behind the Milky Way, and what this means for the size of the universe.

Our natural reaction to such numbers is to give up trying to comprehend them.

A second response is that faced with numbers like this, people will try and question their usefulness. John Maudlin himself quite rightly points out that countries or companies often don't book their reserves at market value, and so the full impact of a $119 trillion will not be felt.

But then he goes on to catalogue the realised, actual damage to the global economy. And we can see from everything else we read, and everyone we talk to, that the scale of today's crisis is unprecedented. Just look, for instance, at oil company losses and the rising number of sovereign debt crises.

So how do we begin to get our heads around a number as big as $119 trillion? Think of it, as Maudlin again says, of the loss to the global economy of a couple of hundred Googles and Apples suddenly going out of business.

There is a third reaction to numbers of this scale, which is of course to pretend that everything will be more or less fine in a year or so, when most of the economic damage has been repaired. This is based on the notion that this just another downcycle.

But this is clearly not just another downcycle. The collapse in oil prices is symptomatic of the biggest changes in the global economy since at least 1989 and there is no going back.

All of these three reactions to $119 trillion would be a waste of time that none of us have anymore. All of us must instead very quickly make the journey from Denial to Acceptance.


Article Tags

United States North America Finance

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser. More

comments powered by Disqus

Related News

Join 80,000 oil and gas professionals who receive our weekly newsletter.

You may unsubscribe at any time with one click.

Popular Headlines View all

Latest Opinion View all

Join 90,000 other oil and gas professionals

Network with others, build your profile, and receive the latest oil and gas news in your inbox. It's free!

Create profile

Time for a change? All jobs Jobs near you


OilVoice, established in 2002, is your leading source of upstream news, jobs and industry information.


Each week we send our weekly industry round-up. Why not try it? You may unsubscribe at any time.

Contact OilVoice

Milton Keynes
United Kingdom
Contact Us

Stay Connected

2016 © OilVoice  .  Privacy Policy  .  Terms of Service  .  Oil Careers  .  Advertise with us