Photo Credit: Eric Kounce

Black Gold Below?

Falling oil prices have put significant pressure on countries that have long relied on reaping the benefits of their large oil resources. The anticipated global transition away from fossil fuels will further add to that pressure. We wonder: Which country has the world’s largest proven crude oil reserves?

A. Canada
B. Russia
C. Saudi Arabia
D. Venezuela

A. Canada … is not correct.

It might not have the same reputation as the Persian Gulf countries, but Canada has the world’s third-largest proven oil reserves in 2017, according to the U.S. Energy Information Agency, at 169.7 billion barrels.

However, of that total, about 166 billion barrels (or 98%) exists as oil that is trapped in tar sands. Environmental impacts aside, that crude oil is expensive to pump. For that to be economical, Canada requires global prices to be – and remain – high.

The country’s relative security and political stability had made it attractive to drilling companies . But with the huge decline in global crude oil prices, much of Canada’s production is or will become unprofitable.

That could be devastating to the oil-producing regions of Canada. But it comes as relief to those Canadian provinces whose economies do not produce oil, but whose exports struggled competitively on world markets under an oil-strengthened Canadian dollar.

Canada’s neighbor, the United States, no longer ranks among the top ten countries with the world’s largest proven oil reserves, as of 2016, as its untapped stocks continue to dwindle. While tenth-ranked Nigeria’s oil reserves have remained steady at 37 billion barrels, the United States’ reserves are now down to 35.2 billion barrels (11th overall).

B. Russia … is not correct.

Russia has the world’s eighth-largest proven oil reserves, at 80 billion barrels.

This oil wealth, along with natural gas resources, provided much of the funding Vladimir Putin used for the first decade or more of his leadership. Russia is the second-largest crude oil exporter by volume.

The arrival of sanctions over the 2014 annexation of the Ukrainian territory of Crimea, along with falling world oil prices, has squeezed the Russian economy over the past few years. There are few signs of improvement on either front.

Among the so-called BRIC countries, Russia leads easily in the size of its proven oil reserves. China ranks 13th with 25.6 billion barrels in 2017. Brazil, whose state-owned Petrobras is at the center of recent political scandals, ranks 15th, at 13 billion barrels. India has proven oil reserves of just 4.2 billion barrels, ranking 24th worldwide.

Russia’s neighbor Kazakhstan, the largest former Soviet Republic after Russia itself, has a further 30 billion barrels in proven reserves, ranking 12th, between the United States and China.

C. Saudi Arabia … is not correct.

Saudi Arabia has the world’s second-largest proven oil reserves in 2017, according to the U.S. Energy Information Agency, at 266.4 billion barrels. It is the world’s largest oil exporter by volume.

Five of the ten largest proven oil reserves in the world are located in the Persian Gulf. Rival Iran ranks fourth (158.4 billion barrels), Iraq ranks fifth (142.5 billion barrels), Kuwait ranks sixth (101.5 billion barrels) and close ally UAE ranks seventh (97.8 billion barrels).

Following the 2015 nuclear deal, Iran can now export again to Europe. From 2012 to 2016, it was effectively barred from doing so under the impact of sanctions.

D. Venezuela … is correct.

Venezuela is the clear leader in proven global oil reserves, with 300.9 billion barrels still in the ground. That is 13% more than second-ranking Saudi Arabia. In fact, Saudi Arabia and the 11th-ranked United States would have to combine their proven reserves just to match Venezuela’s.

Venezuela’s oil is particularly heavy crude, which is costly to produce and refine. Approximately 8% of the oil imported into the United States comes from Venezuela.

Until the latest economic crisis began in Venezuela, the country’s government also donated a total of $500 million in winter heating oil to two million low-income Americans as a decade-long goodwill gesture that began after Hurricane Katrina.

Currently, the left-wing government in Venezuela, along with a constitutional assembly, is locked in a destabilizing political struggle with conservative antagonists, while ordinary citizens are caught in the middle. Its economy has cratered already.

The country’s oil wealth underscores the boom-bust risks of such resource dependence. Venezuela’s bountiful oil resources have both enabled and hindered its development.

From 1999 to the present, this wealth was used to experiment with socialism, launched by the late President Hugo Chavez. Oil wealth provided the government with funding for its projects that was independent from tax revenues and other political challenges.

This dependence on oil also meant that the entire project hinged upon Venezuela’s ability to export its oil and keep export prices high. Moreover, the money coming in from oil exports and being spent relatively freely contributed eventually to significant inflation.

Editor’s Note: For a list of with data points for all the countries included in the data analysis (provided in this case by the U.S. Energy Information Agency) that underlies this quiz, click here.

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