What Causes Oil Scarcity?

Oil scarcity can be caused by a number of factors, including technical limitations, political maneuvering, and capacity problems. This resource is considered scarce when the supply cannot meet the demand. Rising demand increases pressures on existing supplies and can create scarcity. The world’s supply of oil is limited to existing deposits and the ability to access and exploit them, which can become extremely expensive with some remote or complex deposits. Costs for oil and fuel are not necessarily immediately linked to oil scarcity because there are other factors involved, but they certainly play a role.

One issue is a temporary supply shock. A classic example might be a hurricane that damages refineries, distribution centers, and pipelines in a region that processes large volumes of oil. This can cause temporary oil scarcity because other facilities may not be able to take over. As soon as these facilities get back online and normal distribution resumes, the supply should return to pre-storm levels. Preparing for such events can be tricky, as it involves thinking ahead to capacity problems that are difficult to predict.

Another contribution to oil scarcity is technical and geological limitations on supplies. Some deposits simply cannot be accessed at all, while others require more intensive work to reach usable oil. Production capacity can be limited and may be hindered by the capacity for transporting, storing, and processing the oil. An imbalance in the global distribution of container ships, for example, can mean that there is oil waiting for transportation in one location without any ships to pick it up.

Politics can also play a role in oil scarcity. In the 1970s, an oil embargo in the Middle East led to a crisis in other nations as access to reserves was effectively cut off. Oil was available for use, but most nations were not allowed to access it. The net effect of oil scarcity in this situation could be repeated in the future. Responses to this have included exploiting domestic resources as well as laying in larger reserves to be better prepared for similar events in the future.

Researchers on oil scarcity use a variety of tools to estimate the size of deposits, as well as the feasibility of reaching them. In addition, they consider ways to improve infrastructure and capacity to make sure supplies are not limited by these issues. Political negotiations can function to reduce the risk of an embargo where it might become difficult for some nations to access fuel and crude oil supplies.