There is a fairly good chance that most of the world’s known oil reserves will never be drilled out of the ground. When future historians write of our time, they will definitely mention the end of the Oil Age. The end of oil will not come about as a result of drilling. It will come much earlier, as the result of an embargo on one country or another. The Organisation of Petroleum Exporting Countries (OPEC) is centred mostly in the Middle East, with 66% of its reserves are situated here. OPEC’s total proven oil reserves stand at over one trillion barrels. As of 2013, the states with the highest oil reserves are Venezuela, Saudi Arabia, Canada, and Iran, with a joint 60% of the world’s oil reserves. But advances in technology are beginning to offer a way for economies, especially those of the western world, to diversify their supplies of energy. The result? The grip of oil is loosened – and with it, that of the countries that produce it.
The world’s biggest oil consumers have already started to adopt measures as if OPEC’s worst dreams will soon come to fruition. The coal industry has already gone into free fall. In 2009, there were 523 coal plants in operation in the United States. More than 200 have shut down since, mostly replaced by natural gas plants, which emit half as much carbon dioxide.
The rise of solar power has been a major success, and let to the price of solar energy plummeting. This energy revolution has rippled through the advanced economies. In a few years, even in countries with average sunlight, the cost of building a new solar power plant will be far lower than that of coal or natural gas. The price of solar power has fallen by $7 a watt in just two decades. In light of this, it was predicted that it would cost just 50 cents per watt by 2030 – this point has already been reached. By 2023, new wind power stations will cost less than natural gas. Tesla’s home battery, the ‘Powerwall’, could revolutionise the way homes and businesses are powered.
The Oil Age is slated to end by the year 2035, but the reserves will last another century. If the oil-exporting countries do not wish to see their economies utterly destroyed, they must diversify, invest in human capital, and make the private sector much more productive. The party is coming to an end – and these countries must be prepared.