Fossil fuel reserves represent the total quantity of hydrocarbon fuels--such as coal, oil, and natural gas--estimated to be economically recoverable from a specified region. In order to aggregate the different physical units commonly used for each type of fuel, the reserves may be expressed in terms of energy content, using a measurement such as joules.

Calculated fossil fuel reserves are based on estimates of the physical deposits that may exist in a region. These estimates have several sources of potential inaccuracy. Even for a given oil well already in operation, geologists and engineers cannot be certain how many barrels will be extracted before it is shut down. To quantify the uncertainty of the estimates, there are three common categories of reserves. Proved reserves are those reserves that can be developed with reasonable certainty, usually taken to be 80 to 90 percent confidence, using known techniques and with prevailing market conditions. Probable reserves are those that can be developed with 50 percent confidence. Possible reserves may be developed with 10 percent confidence--for example if market conditions change or extraction technology improves.

Estimates of fossil fuel reserves rely not just on geological and engineering factors, but on economic factors as well. The operators of an oil well do not extract the entire reservoir of oil lying beneath the surface; at some point, production is discontinued because it costs more money to extract an additional barrel from the deposit than the barrel can be sold for on the market. This means that, as oil and other fossil fuel prices change, estimates of reserves will also change. The Energy Information Administration has estimated that, as of December 31, 2006, the United States had proved reserves of 21 billion barrels of crude oil, 6 trillion cubic meters of dry natural gas, and 17 billion metric tons of recoverable coal reserves.

Estimates of fossil fuel reserves at a local level are important in the oil industry. Company officials and shareholders need such estimates in order responsibly to invest in future projects. Estimates of fossil fuel reserves on a worldwide scale have many implications for the debate over climate change and energy policies.

If M. King Hubbert's theory of peak oil is correct, then the rate of worldwide oil production has reached a maximum level or will do so in the near future. According to this theory, as existing deposits are exhausted, it will become more and more difficult to locate new deposits. Over time, it will become costlier to bring a barrel of oil to market, and production will not be able to keep up with growth in demand. Those who subscribe to the peak oil theory often favor government policies that encourage the development of renewable forms of energy (such as solar and wind power), because they believe the era of conventional fossil fuel use is ending.

Other analysts dispute the peak oil theory and blame government regulations for hampering the growth in supply to meet the growing worldwide demand for energy. According to this view, production of oil (as well as other fossil fuels) would grow significantly if the U.S. federal government lifted restrictions on energy companies for the development of the Arctic National Wildlife Refuge (ANWR) and offshore areas.

Optimists for the future of fossil fuels also argue that it only makes economic sense to look for additional reserves when the relative supply begins to dwindle. For example, in the early twentieth century, many official forecasts declared that the United States would soon run out of oil, based on known reserves at the time and the rate of oil consumption. In retrospect, these warnings were unfounded, because the oil industry explored and found new deposits as the older ones diminished. Some analysts believe the same will prove true regarding more modern warnings and that fossil fuels will continue to be an economical source of energy for decades into the future.

The role of the Organization of Petroleum Exporting Countries (OPEC) in the world oil and natural gas markets affects the treatment of fossil fuel reserve estimates. Many critics of OPEC argue that the lack of transparency applicable to national oil companies--in contrast to Westernbased, private companies owned by shareholders--casts doubt upon the official reserve estimates of nations such as Saudi Arabia. For example, many analysts worry that the ministers of Saudi Arabia's vast deposits exaggerate the nation's reserves in an effort to keep the world complacent with its dependence on conventional fuels.

Bibliography:

1) Bradley, Robert, Jr., and Richard Fulmer. Energy: The Master Resource. Dubuque, Iowa: Kendall/Hunt, 2004.

2) Simmons, Matthew. Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy. Hoboken, N.J.: John Wiley & Sons, 2005.

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