233. THE REAL USGS PREDICTION
The USGS position on undiscovered world conventional oil resources (excluding the U.S.) is completely summarized in this graph (click to enlarge):
Now, there seems to be some confusion in the peak oil community regarding basic probability theory, so I'm going to walk you step-by-step through the meaning of this graph.
First of all, the USGS does not regard the amount of undiscovered oil in the ground as a fixed number. It is often claimed, as Rembrandt writes in #232 below, that "the USGS predicts a total of 939 Gb of undiscovered conventional oil and NGL in the world". This is not true at all. 939 is their "mean" prediction.
Basically, the USGS regards the amount of undiscovered oil like tossing a die.
It's a random process which can turn out different ways. So if you ask them: "How much oil is in the ground?" they don't say definitively: "The die will show a 3." They say: "The die can turn out to be 1, 2, 3, 4, 5 or 6, and we're going to tell you how probable each of those outcomes is."
Now, if you roll a die, the mean outcome turns out to be "3.5". So that is basically what the USGS is saying for the "die" of oil production. The die will be rolled one time, and the USGS gives a mean of "3.5". Does this imply that the USGS is wrong if the die shows a 1, or a 6, or a 4? Not really, because they recognized the possibility of all those outcomes.
Looking to the graph, notice that the horizontal axis indicates the different outcomes. The worst case outcome is about 200 Gb, and the best case outcome is about 1,300 Gb. The green lines running up from each amount indicate the probability of that outcome. As you can see, the probability is almost zero at the extremes. It is possible that there is 200Gb or 1,300Gb -- it's just highly improbable.
The question is: What is the most likely outcome? Well, there are various ways to look it. One way is to look at the most frequent outcome -- i.e. the green stripe which is the tallest. This is the "mode", and here it corresponds to a value of about 500 Gb.
Another way is to look at the "average" outcome -- i.e. the mean. In this case the mean turns out to be 649 Gb. Notice also that this curve (which is called the "log-normal density") is different than the usual Gaussian bell curve. It's assymetric and squashed to the left side so that the mode is lower than the mean.
This has interesting consequences. Notice the F95, F50 and F5 numbers given at the upper right of the graph. These numbers have the following meaning:
F5=1,107: The probability of undiscovered oil exceeding 1,107 Gb is 5%.
F50=607: The probability of undiscovered oil exceeding 607 Gb is 50%.
F95=334: The probability of undiscovered oil exceeding 334 Gb is 95%.
The F50 value is the "median" outcome. If you ran history over and over again (like rolling a die), half of the outcomes would exceed 607, and half of them would not.
If you think about it, finding 607 Gb is basically a matter of flipping a coin, so would you actually bet on a good outcome happening? Would you bet your life on it happening? That would be equivalent to putting a loaded gun and an unloaded gun into a bag, pulling one out at random, putting it to your temple, and pulling the trigger. How confident would you be of a good outcome in that case? That's basically the same amount of confidence you should have toward the outcome of finding at least 607 Gb.
Even stranger, notice that the mean (649 Gb) is greater than the median (607 Gb). This means that finding 649 Gb (or more) is even less probable than finding 607 Gb (or more). The oil discovered will exceed the mean of 649 Gb in less than 50% of the outcomes if we run history over. The odds of achieving at least the mean are even worse than the odds of not killing yourself with the guns in the bag game. It's like playing the bag game with the added rule that you are slightly more likely to choose the loaded gun. I don't think anyone would be eager to play that game, so I don't think we should have too much confidence in reaching the mean of 649Gb.
I'm a conservative bettor, so I personally would rather put my money on an outcome which is at least 75% probable. Just eyeballing the graph, that would appear to be a value of at least 400 to 500 Gb of world undiscovered conventional oil resources (excluding U.S.). From that number we would also have to subtract discoveries from 1996-2005 (i.e. for the period after completion of the USGS study).
-- by JD