Why Are So Many Analysts Not Forecasting an Oil Shock?
Counting Apples as Oranges: Reserves vs. Resources One of the more interesting pieces of research we came across when preparing this report resulted from asking the question, “Why have so few oil analysts picked up on Ivanhoe’s work, and expressed concern about a pending and very serious oil shock?” The reason largely hinges on confusing two critical concepts Reserves are conservative estimates prepared by engineers and relate to the quantity of crude oil and natural gas in a reservoir currently available for production given realistic costs, time frames, and production techniques. Active Reserves are those extractable within 20 years or less. Inactive Reserves are those which are known to exist, but are not extractable within 20 years, usually due to inadequate technologies, such as the enhanced recovery techniques discussed herein earlier. Resources are geologists’ optimistic estimates of undiscovered crude oil and natural gas theoretically present in an area. Resources do not necess
