Are we running out of oil? That's what the doomsayers say. We are past our (Hubbert's) peak and it's downhill from here. War, famine, pestilence, perhaps even extinction - those are the apocalyptic scenarios posited by folks predicting the oil age is over and the era of stringency is nigh.
Whether we are running out of oil or not, one thing we're certainly not short of is people who claim that we are. The good news about this bad news is that, historically, the doomsayers have always been wrong.
Almost since the first discoveries of oil in the U.S. in 1859, people have been saying we're running out. In 1874, the state geologist of the nation's leading oil producer, Pennsylvania, warned the U.S. had enough oil to last just four years. In 1914, the federal government said we had a ten-year supply. The government announced in 1940 that reserves would be depleted within a decade and a half. The Club of Rome made similar claims in the 1970s. President Carter famously predicted in 1977 that unless we made drastic cuts in our oil consumption, "Within ten years we would not be able to import enough oil — from any country, at any acceptable price." And so it goes today, where a slew of books and Web sites make fantastic claims about dwindling supplies of crude.
The chief problem with those who say the world is running out is that they have always looked at the issue the wrong way. Questions about energy supply shouldn't be thought of in terms of how much is available, but in terms of how good mankind is at finding and extracting it.
In the years after Col. Drake discovered oil at Titusville, Pennsylvania, on the eve of the Civil War, wildcatters could only drill down several hundred feet. If we were confined to relying solely upon the technology available in the 19th century — or, for that matter, the tools available just three decades ago — then yes, quite possibly we could be looking at the end of oil.
But we don't use those outmoded technologies. Advances in seismology and engineering have placed well within our grasp supplies of oil previously considered inaccessible. Today they are easily and economically recoverable.
Today's drills don't stop at a couple hundred feet. They bore miles into the earth. They travel laterally as well, so that a well dug in one spot might recover oil underneath locations miles away. Because of directional drilling, today one derrick can do the work that once took dozens, reducing the surface footprint of oil extraction.
Energy companies today can drill far offshore, too, in very deep water. They recover deposits that doomsayers of the past thought would be impossible to get at. Other technologies and advanced processes have boosted the recovery rates of fields thought to be tapped out.
The Kern River Field near Bakersfield, California, for instance, pumped nearly 30,000 barrels per day throughout much of the first decade of the 20th century. After 1910, production declined for the next 40 years. The field was nearly abandoned.
Innovations like pressurized steam and hot water injections changed that. Production at the Kern River field steadily ramped up after 1960, and the field has produced more than 125,000 barrels of oil per day since 1980. Recent estimates suggest Kern River still holds an additional one billion barrels of recoverable reserves.
That example mirrors the larger trend about oil. In 1970, experts believed the world had 612 billion barrels of proved reserves. Over the next three decades, more than 767 billion barrels would be pumped. Did we use up all the world's oil and then some? Hardly. Conservative estimates today place the world's provable oil reserves at 1.2 trillion barrels. New deposits of oil haven't been created. It's just that human ingenuity has come up with ways to get hard-to-reach deposits.
Expect that trend of increasing reserves to continue. Earlier this month the Department of Energy released a set of reports suggesting that enhanced 21st century oil recovery techniques might quadruple the amount of recoverable oil in the United States. DOE predicted that carbon sequestration technologies that inject carbon dioxide into oil reservoirs could soon add perhaps 89 billion barrels to the 21.4 billion barrels of proven reserves. More fantastically, government researchers found that "in the longer term, multiple advances in technology and widespread sequestration of industrial carbon dioxide could eventually add as much as 430 billion new barrels."
The same goes for Saudi Arabia, the world's largest oil producer. The Saudis have 261 billion barrels of proven reserves. A year and a half ago, the Saudi energy minister suggested that number was way too small. "There are big chances to increase the kingdom's producible reserves by 200 billion barrels," he said. "This will come either through new discoveries or through increasing production from known deposits."
Questions about global oil supplies also must take into account unconventional sources of oil, like Canada's tar sands or shale oil in Colorado. These offer the promise of many hundreds of billions of additional barrels of oil that are currently extractable using today's technology. Processes for shale and tar sand oil generally are more expensive than conventional oil drilling. If crude oil were trading at $20 per barrel, investment in such extraction would not be viable. With the global price of crude trading above $60, however, they are attractive economically.
None of this is to suggest the world won't run out of oil one day. That could happen. It just isn't going to happen anytime soon.
Max Schulz is a Senior Fellow at the Manhattan Institute. He can be reached at email@example.com.