By John Richardson
NO less than $119 trillion (or $119,000 billion) has been wiped off the value of the world’s proven oil reserves.
YES, that’s right, if you look at the data on proven oil reserves in the CIA factbook, as John Mauldin did to verify calculations originally made by David Aron Levine, this is the number that they both came up with. This is based on 170 trillion bbls of proven reserves and assuming a price decline from $100/bbl to $30/bbl, for the sake of argument.
Humans struggle to get their hands around such vast numbers. This morning I am for example floundering to get my head around the discovery of hundreds of previously unknown galaxies that were hidden behind the Milky Way, and what this means for the size of the universe.
Our natural reaction to such numbers is to give up trying to comprehend them.
A second response is that faced with numbers like this, people will try and question their usefulness. John Maudlin himself quite rightly points out that countries or companies often don’t book their reserves at market value, and so the full impact of a $119 trillion will not be felt.
But then he goes on to catalogue the realised, actual damage to the global economy. And we can see from everything else we read, and everyone we talk to, that the scale of today’s crisis is unprecedented. Just look, for instance, at oil company losses and the rising number of sovereign debt crises.
So how do we begin to get our heads around a number as big as $119 trillion? Think of it, as Maudlin again says, of the loss to the global economy of a couple of hundred Googles and Apples suddenly going out of business.
There is a third reaction to numbers of this scale, which is of course to pretend that everything will be more or less fine in a year or so, when most of the economic damage has been repaired. This is based on the notion that this just another downcycle.
All of these three reactions to $119 trillion would be a waste of time that none of us have anymore. All of us must instead very quickly make the journey from Denial to Acceptance.