By Jared Cummans
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 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 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.
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].
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 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.
Disclosure: No positions at time of writing.