07/07/2016 04:47 EDT | Updated 07/07/2016 05:59 EDT

Take A Number, Alberta Oilsands: U.S. Now Has World's Largest Oil Reserves

The world has 70 years' worth of oil left, study says.

  • World has 70 years' worth of oil left: study
  • Russia, Saudis still have the advantage
  • Canada faces NAFTA competition for oil markets

The Canadian oil industry in recent years has faced new competition from the very country where most of its oil is sent — the United States.

A new study on oil reserves shows just how serious that competitive threat has become. According to data from oil and gas consultancy Rystad Energy, the U.S. has surpassed Saudi Arabia and Russia to have the world’s largest oil reserves.

The U.S. has 264 billion barrels of oil, compared to Russia’s 256 billion barrels and Saudi Arabia’s 212 billion.

“We have done this benchmarking every year, and this is the first year we’ve seen that the U.S. is above Saudi Arabia and Russia,” Rystad analyst Per Magnus Nysveen told The Guardian. As recently as three years ago, the U.S. was in fourth place on oil reserves.

A worker is seen at an Encana Oil & Gas (USA) Inc. fracking and extraction site, outside Rifle, Colo. in 2014. Fracking has made billions of barrels of U.S. oil reserves economical to extract. (Photo: Brendan Linsley/Associated Press)

That’s not to say that oil suddenly and magically appeared under American soil. The industry measures “recoverable oil reserves” — not the total amount of oil under a country, but the amount that can be economically and legally extracted.

The U.S.’s oil deposits are growing thanks to fracking — a process of using water and chemicals to break open rock and extract the “tight oil” inside. With this oil counted towards the U.S. reserves, the country turns out to have more oil than anyone had previously thought.

“This data confirms that there is a relatively limited amount of recoverable oil left on the planet.”

— Per Magnus Nysveen, Rystad Energy

By Rystad’s estimate, the world has just short of 2.1 trillion barrels of recoverable oil reserves left. If the global production rate of 30 billion barrels per year remains unchanged, that amounts to 70 years’ worth of oil.

Noting research showing that the world’s car population is set to nearly double to two billion by 2035, Rystad says it’s becoming “very clear that oil alone cannot satisfy the growing need for individual transport.”

Trucks drive along a road near the Petroleos Mexicanos (PEMEX) Antonio Dovali Jaime refinery in Salina Cruz, Mexico in May. Mexico promises to be bigger competition for Canada's oilsands as it privatizes its industry. (Photo: Susana Gonzalez/Bloomberg via Getty Images)

Analysts note that, while the U.S. has the most oil, the cost of extracting American “tight oil” is much higher than in conventional Russian or Saudi oil fields.

"The rise in prominence of the U.S. doesn't diminish the role of Saudi Arabia or Russia, which have some of the cheapest [costs] to produce oil in the world,” analyst Richard Mallinson told the Financial Times.

But it could diminish the role of Canada’s oilsands. The International Energy Agency earlier this year noted that Canadian oil is facing increased competition from both of the country’s NAFTA partners, the U.S. and Mexico (which is privatizing its oil industry).

Climate activists, aboriginal groups and some landowners united to oppose TransCanada's Keystone XL pipeline in the U.S., which observers say was a major reason for the Obama administration's decision to reject the project. (Photo: Pete Marovich/Bloomberg via Getty Images)

With the U.S. rejecting the Keystone pipeline and producers facing new competition, Canada will have to find new markets for its oil, the IEA said.

But the search for new markets is faring little better than the Keystone pipeline gambit. The Federal Court of Canada recently revoked approval for the Northern Gateway pipeline, which would have shipped Alberta oil to a deep-sea port on the B.C. coast, for export to Asia.

Observers say the court’s decision has thrown a large question mark over the future development of the oilsands. It’s unknown yet how the federal Liberals will respond to the court’s move. The pipeline was originally approved under the previous federal Conservative government.

Even as competition heats up, the oilsands are preparing to add more to the world's oil supply. The IEA estimates that production will grow by another 800,000 barrels per day, thanks to expansion in existing projects, even though low prices mean new oilsands projects have come to a standstill.

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