Major Countries Burn Up Crude Reserves: Big Oil In Trouble?

It is something that peak oil advocates have been warning us for a long time; our world using up our last reserves of oil. While the day that the last drip of crude is burned up is a long ways out, some parts of the world may be heading for a major pinch in production. As our world population continues to expand, with the total predicted to hit nine billion by 2050, our addiction to crude only increases, as we use oil for a wide number of things in our daily lives. Besides its most dominant use as a fuel for automobiles and the like, oil is also used in a number of other processes like the production of plastics and variety of other industrial outputs [see also Ultimate Guide To RBOB Gasoline Investing].

Of course, as countries begin to eat through their proven reserves, alternative energy will get a closer look from a number of nations across the globe. For the time being, adopting mass use of clean energy would be a very costly process, as it is much cheaper to use fossil fuels as opposed to something like solar or wind energy. But as crude begins to dry up, some nations may be forced to incorporate some of these alternate fuel options in the near future, though many will likely turn to LNG and other fossil fuel derivatives first. Another important factor to note is that there may still be vast oil fields lying undiscovered. All it takes is one lucky strike to find a major reserve that can boost any number of countries for a significant period of time.

Until a major discovery occurs, though, there are several big-name oil producing countries that are in jeopardy of using up their proven reserves. Below, we outline five countries running low on oil reserves, and five companies to watch as the oil drama plays out:

Brazil

Brazil is a popular emerging market that ranks high among global oil players, as its average output comes in at about 2.4 million barrels per day. For the time being, Brazil’s reserves add up to approximately 12.6 billion barrels, but that is subject to change. A recent discovery could boost reserves all the way up to 18 billion, though some of Brazil’s more recent discoveries may be in oil fields that will be difficult to reach. Everything held constant, however, Brazil will run through their oil reserves in just 14 years time [see also The Guide To The Biggest Companies In Every Major Commodity Sector].

Petrolero Brasilerio (PBR), often known as Petrobras, is one of the largest oil drilling/exploration companies in the world, with a market cap of about $187 billion. Because Petrobras is a drilling company, their profits will be directly linked to the amount of oil they can extract annually. As one of the largest companies in the Southern Hemisphere, Brazil’s shaky oil outlook could be a major problem for the long-term sustainability of this company.

China

China is the top dog when it comes to emerging markets. Holding the world’s largest population, the country is the second highest oil consumer and the fifth largest producer. Currently, China is producing about 3.8 million barrels per day. Proven reserves tally at about 16 billion barrels; putting China at risk of running out of oil in 12 years. In order to combat shrinking reserves, a number of companies are expanding operations abroad, but that will come at higher costs and will have a major affect on the bustling Chinese economy [see also Commodity Investing: Physical vs. Futures].

The largest Chinese oil company goes to PetroChina (PTR). PTR has a market cap of $234 billion, making it one of the largest firms not only in China, but also in the world. PTR pays out a healthy dividend of 4.1%, attracting a number of investors to its high payout. Yet those looking at this firm should also note that the company is state-owned and is one of the firms seeking to move operations abroad, so it may be able to avoid major losses if it can establish significant operations outside of China’s dwindling oil fields.

Norway

The Norwegians are currently the sixth-largest oil producers in the world, with close to 2.5 million barrels output everyday. Current reserves come in at about 6.7 billion barrels, and with current production, this will tap out in seven years. Unfortunately, with little space to work with, and the North Sea already being well-explored, the country is having trouble finding more reserves, meaning that this seven-year figure has a decent possibility of holding true.

Norway’s bellwether oil producer comes from Statoil (STO). The company is not only a major player in Norway, but also across the world. STO has a market cap of $77 billion and pays out a nice dividend of 3.9%. Statoil is majority-owned by the government, and while its oil outlooks are grim, the company seems to be finding a number of natural gas deposits, which could be a big industry as crude continues to slide [see also Three Mining Companies With Robust Yields].

United States

The U.S. has long been the poster-child for crude oil. We consume, by far, the most oil on an annual basis, and we are also among the top three producers. Our current output totals up to about 8.5 million barrels per day; this coupled against reserves of 21.3 billion barrels puts us next to Norway with just seven years of reserves remaining. As the world’s largest consumers, we may be forced to depend even more heavily on foreign oil, which has been something of an issue in the past. “For the near future, increasing imports are the only fix for a supply crisis” writes Business Insider. This alarming figure may also spark more use of alternative fuels for our economy.

ExxonMobil (XOM) is not only the largest oil producer on the map, but is also the largest company in the world by market capitalization (though Apple is nipping at its heels). With a dividend payout of 2.5% and an average daily volume of 24.4 million shares, this stock is clearly an investor favorite. Exxon is a multinational company that is also working to bring alternate fuels to market like hydrogen, but with just seven years of oil left, XOM may take a bit of a blow once our reserves start to run out [see also Analyzing Five High Yielding Oil & Gas Pipeline Stocks].

Colombia

Colombia is an emerging market that has recently gained a lot of investors’ attention thanks to the expansion of the exchange-traded industry. The country is known for its high volatility and its geopolitical instability. Their current crude output isn’t high by global standards, about 670,000 barrels per day, but its their low reserves that are the issue. Colombia has just 1.4 billion in proven reserves, which could be tapped in as little as six years. One of the country’s major problems is a number of foreign companies that have been allowed to extract in Colombian territory, forcing already short reserves to quickly diminish.

As Colombian oil begins to run dry, Ecopetrol (EC) will be the company to keep an eye on. The firm has a market cap of $87.9 billion and a substantial dividend yield of 5%. Investors should note that large portions of Colombia are unexplored, and contain geological structures mirroring Argentina, an extremely oil-rich nation (who incidentally will run through reserves in nine years). New discoveries could boost EC, but if foreign competitors get there first, Ecopetrol could be in trouble.

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Disclosure: No positions at time of writing.

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17 Responses to “Major Countries Burn Up Crude Reserves: Big Oil In Trouble?”

  1. [...] Crude oil is one of the most prolific commodities as it has a major affect on commodities all around the world. As such, investments in this sector are incredibly popular, and a number of major oil companies offer competitive yields. British Petroleum (BP), however, offers one of the most enticing yields in the space, with an annual dividend 4.7%. BP was under major scrutiny last year after the Deepwater Horizon spill caused massive damage in the Gulf of Mexico. While its stock price has yet to recover, the company was able to reinstate dividends to add value back to its large cap structure [see also Major Countries Burn Up Crude Reserves: Big Oil In Trouble?]. [...]

  2. [...] Crude oil often has heavy ties to the overall economy and it will typically coincide its daily movements with a benchmark like the S&P 500. That being said, calling crude undervalued may be something of a stretch, as it appears that the American economy is not exactly on the fast track to recovery, let alone the global economy. But with such a hefty drop in such a short period of time, crude has certainly created an enticing opportunity for investors to buy in and make a quick turn around [see also Major Countries Burn Up Crude Reserves: Big Oil In Trouble?]. [...]

  3. [...] While equities bounced back and forth, crude oil was taken for a nasty ride, with its price briefly dipping below $80 per barrel. While oil has now recovered, sitting near the $89 per barrel mark, last month saw an unusually high volume topping 17 million, representing a 48% increase from July’s volume. All in all, energy contracts had a total volume of roughly 35.5 billion, meaning that crude oil contracts accounted for nearly half of all energy trading. Investors looking to gain access to crude oil futures can not only use the CME Group, but also some exchange traded products like United States Oil Fund (USO) and United States Brent Oil Fund (BNO) for exposure to crude futures contracts [see also Major Countries Burn Up Crude Reserves: Big Oil In Trouble?] [...]

  4. [...] Natural gas has quickly become one of the most popular commodities as its violent daily movements make it perfect for traders who don’t mind a bit of risk in their daily lives. But apart from acting as a trading instrument, natural gas is an extremely popular fossil fuel that is only predicted to grow in the coming years. As the world has reached a plateau in crude production and with many countries on pace to use up their proven reserves within the next decade, natural gas, a much more abundant resource, seems to have a strong future ahead [see also Major Countries Burn Up Crude Reserves: Big Oil In Trouble?]. [...]

  5. [...] Alternative energy investing has surged in popularity in recent years as our world has felt the effects of basing the majority of our economy off of a finite resource. Though crude oil and other fossil fuels will last us for the foreseeable future, there will come a time when our energy consumption will have to look to alternative, renewable resources. The investment thesis behind any of the several alternative energies can be thought of as a play against crude oil, or as one of a natural evolution that we will have to face sooner or later. The timelines for our fossil fuel addiction running dry vary across the board, but it is generally accepted that this issue won’t come to fruition anytime soon [see also Major Countries Burn Up Crude Reserves: Big Oil In Trouble?]. [...]

  6. [...] Alternative energy investing has surged in popularity in recent years as our world has felt the effects of basing the majority of our economy off of a finite resource. Though crude oil and other fossil fuels will last us for the foreseeable future, there will come a time when our energy consumption will have to look to alternative, renewable resources. The investment thesis behind any of the several alternative energies can be thought of as a play against crude oil, or as one of a natural evolution that we will have to face sooner or later. The timeline for our fossil fuel addiction running dry varies across the board, but it is generally accepted that this issue won’t come to fruition anytime soon [see also Major Countries Burn Up Crude Reserves: Big Oil In Trouble?]. [...]

  7. [...] in recent years as our world has felt the effects of basing the majority of our economy off of a finite resource. Though crude oil and other fossil fuels will last for the foreseeable future, there will come a [...]

  8. [...] recognition in new years as a universe has felt a effects of basing a infancy of a economy off of a finite resource. Though wanton oil and other hoary fuels will final for a foreseeable future, there will come a [...]

  9. [...] recognition in new years as a universe has felt a effects of basing a infancy of a economy off of a finite resource. Though wanton oil and other hoary fuels will final for a foreseeable future, there will come a [...]

  10. [...] in recent years as our world has felt the effects of basing the majority of our economy off of a finite resource. Though crude oil and other fossil fuels will last for the foreseeable future, there will come a [...]

  11. [...] in recent years as our world has felt the effects of basing the majority of our economy off of a finite resource. Though crude oil and other fossil fuels will last for the foreseeable future, there will come a [...]

  12. [...] in recent years as our world has felt the effects of basing the majority of our economy off of a finite resource. Though crude oil and other fossil fuels will last for the foreseeable future, there will come a [...]

  13. [...] 2011, there were a number of uprisings in Egypt, Tunisia, and Libya. During that period of time, crude oil prices began to spike as supplies hit a bottleneck and many investors realized that some of the [...]

  14. [...] Transocean is a major oil and gas driller and explorer, but you probably know them best from the Deepwater Horizon oil spill in 2010, in which the company operated the failed rig. Despite its history, the stock still presents itself as an interesting play. The company is stationed in Switzerland and boasts a market cap of over $16 billion. Recently, the company has hit some hard times as bad earnings have pushed the security to losses of more than 21% in the trailing year. But for those who buy into the drilling and exploration strategy of RIG, its yield of 5.6% make its beat-down stock price an attractive, but risky, option [see also Major Countries Burn Up Crude Reserves: Big Oil In Trouble?]. [...]

  15. [...] As oil ETFs have grown in size, some regulatory authorities have become concerned that the size of these funds is facilitating speculative behavior and contributing to overall market volatility. Most of the investigation and review on this subject has focused on natural gas futures contracts owned by UNG, but it is likely that any regulations would have an impact on all exchange-traded commodity products that utilize futures contracts to track prices. While the ultimate outcome remains to be seen, the most likely scenario is the implementation of position limits that prohibit a single fund from owning more than a predetermined number of contracts. Depending on the threshold determined, this could prevent commodity funds from expanding further, and may even force some to reduce their positions [see also Major Countries Burn Up Crude Reserves: Big Oil In Trouble?]. [...]

  16. [...] As you can see in the chart above, the prices tend to be highly correlated with each other over a long term period. However, at the start of 2011, right around the same time that the ‘Arab Spring’ began to take place, the prices of the two ETFs began to diverge with BNO climbing far higher than its WTI-tracking counterpart. Once investors realized that more production wouldn’t be lost in the region, and that the Libyan situation was likely to remain an issue for quite some time, the prices of the two ETFs began to, once again, mirror each other throughout the rest of the 3rd quarter of 2011 although BNO kept its hefty premium. Clearly, choosing the correct oil fund can have a huge difference on overall return, just as we have seen in this extreme, but very relevant, case [read Major Countries Burn Up Crude Oil Reserves]. [...]

  17. [...] One of the most important things to remember is that while gold may be overvalued, that does not mean that it is a bad investment, but is rather a factor to keep an eye on. It would be absurd to call gold a bad investment given its historic gains in recent years, but that also does not mean that it is safe at its current levels. For as long as market volatility persists, gold will be able to keep its high prices afloat, but when the day comes where equities finally break ground, this shiny metal will likely suffer a massive drop. When that will happen though, could be anywhere from one year to decades depending on who you ask. Instead, investors simply need to keep a close eye on their gold holdings, and be ready to pull the trigger if and when our economy pulls itself out of its downward spiral and confidence once again returns to the markets [see also Major Countries Burn Up Crude Reserves: Big Oil In Trouble?]. [...]

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