There is plenty of life left in this Oil Age yet

Friday Focus: How long can oil continue? It was Sheikh Ahmed Zaki Yamani, a former Saudi Arabian oil minister, who said in 1973 during the first oil shock: "The Stone Age didn't end because we ran out of stones." The Oil Age doesn't look likely to end any time soon, which is just as well, now that I know so much about it.

Oil. It's among the sexiest three-letter words in the English language. Add "Big" to it and it only gets better.

It is an industry of superlatives: biggest pipeline, biggest platform, biggest truck, biggest everything. But I've been living in Abu Dhabi now for nearly three years and hardly encountered anything to do with the magical substance. It was only a couple of weeks ago, when sailing off the Corniche, that I spied a drilling platform in the distance.

In the hope of finding out more about oil and its cousin gas, I went along this week to the Wildcat Course - an Introduction to Petroleum Operations, which was put on by the PricewaterhouseCoopers (PwC) consultancy. I joined about 80 people in a meeting room at the Rotana hotel on Yas Island. In the course of a morning I learnt more about oil and gas than I imagined possible. It was a bit like being back at school, except the food was better.

Andy Lambert, a petroleum geologist at PwC, explained that hydrocarbons are formed from the decay of organic matter - algae, fish, plants, etc. If these materials collect in sedimentary basins, and the conditions are right, they are compressed and cooked. It is the ultimate slow cooker: fire it up and wait a few million years may not be an obvious recipe for success, but it works in this case.

Then he answered a question that had often puzzled me: why is there so much oil in the Middle East? It is not just to irritate the Israelis, but a happy combination of a lack of movement of the Earth's tectonic plates in the region, a large continental shelf area, and a rich environment full of organic matter. The Middle East has 56 per cent of the world's oil reserves, with Opec controlling 75 per cent in total. Oil occurs on most of the continents, but it gathers and stays in places that are stable, even if their politics can sometimes be a trifle combustible.

Paul Navratil, PwC's Middle East oil and gas leader, produced a slide that showed that until the early 1970s, the price of oil was pretty constant, rising gently with inflation. But that changed dramatically.

"Before geopolitics got involved, the price of oil was stable," he says. "It makes people nervous if they think too much about geopolitics, particularly in the White House."

According to him, you must remember the number 3,000,000,000,000 barrels when you think about oil. "One trillion we have already consumed, one trillion we know about, and we hope there's a further one trillion to find," he says. He's clearly not a fan of the "peak oil" theory.

Even so, demand continues to grow, with China poised to overtake the US as the world's largest consumer of energy. The UAE remains the largest consumer per capita, with the Chinese lagging considerably behind.

Indeed, it is estimated that the average Chinese person consumes as much energy today as an American did in 1911, about the time the Model T Ford came out.

Light, heavy, sour, sweet: oil is given properties rather like a food or a drink. The better the adjective - for example, sweet - the more it is worth. Libyan oil is particularly sweet, which is one reason that the drop in supply has so affected the market price.

"But what was the explanation for the sudden 12 per cent drop in price last Thursday?" Mr Navratil asks. "It was certainly nothing to do with supply and demand."

Trading in oil is no longer limited to a simple transaction between a producer and a refinery. Between being extracted and reaching the refinery, a barrel of oil can be traded up to 30 times. On the New York Mercantile Exchange, oil contracts are counted in units of 1,000, with an average of 650,000 contracts traded every day.

With only 84 million barrels a day produced worldwide, 650 million barrels are traded, showing the disparity between the physical and virtual worlds.

Mr Navratil would love to know how much the price of oil is fuelled by speculators. "If oil costs US$70 a barrel to extract, refine, and transport, does that mean that the other $40 is taken by speculators? If so, that's huge."

He says it is not the industry that should bear the brunt of the blame for milking consumers but the hedge funds and other speculators that are buying in the hope of selling for a profit in the future.

Morgan Stanley, for example, has its own petroleum storage tanks in New York, where it takes physical delivery when needed.

"Nowadays oil is perceived as a dinosaur industry," Mr Navratil says. "That's shocking. Kids grow up wanting to be bankers or working in the tech sector. They think they're sexier. But if they knew what we get up to, we would have to start turning them away."

How long can it continue? It was Sheikh Ahmed Zaki Yamani, a former Saudi Arabian oil minister, who said in 1973 during the first oil shock: "The Stone Age didn't end because we ran out of stones." The Oil Age doesn't look likely to end any time soon, which is just as well, now that I know so much about it.