Commentary: We Are Not Running Out of Oil
By Sterling Burnett, KERA 90.1 commentator
Dallas, TX – Every time oil prices rise for an extended period, the news media issue dire warnings that a crisis is upon us - it's not! Many factors are contributing to the currently high gas prices: limited refining capacity, political restrictions on development of new domestic sources of oil, reduced supply from several oil exporting countries due to political conflicts, limited supplies due to the actions of the oil cartel, OPEC, and finally, increased demand for oil in China. Dwindling supplies of oil is not a factor in the current price at the pump.
New technologies continually increase the amount of recoverable oil, and market prices - which signal scarcity - regularly encourage new exploration and development. The history of the petroleum industry is one of predictions of near term depletion, followed by the discovery of new oil fields and the development of technologies for recovering additional supplies. Before the first U.S. oil well was drilled in Pennsylvania in 1859, petroleum supplies were limited to crude oil that oozed to the surface. In 1855, an advertisement for Kier's Rock Oil advised consumers to "hurry, before this wonderful product is depleted from Nature's laboratory." Indeed, seven oil shortage scares occurred before 1950.
Predictions of an oil famine during the Arab oil embargo in the 1970's were followed by a glut of cheap oil. World oil production continued to increase throughout the 1990's. While prices have periodically spiked, oil prices fell to an inflation-adjusted 30-year low in 2001.
Estimates of the world's total oil endowment have continually grown faster than humanity can pump petroleum out of the ground. In 1920, the U.S. Geological Survey announced that the world's total endowment of oil amounted to 60 billion barrels. By 1950, the estimate had increased to around 600 billion barrels. The most recent estimate was of a 3,000-billion-barrel endowment.
By 2000, 900 billion barrels of oil had been produced. If world oil consumption continues to increase at an average rate of 1.4 percent a year, and no further resources are discovered and no improvements are made in the technology used to recover oil, the world's supply will not be exhausted until 2056.
These estimates do not include unconventional oil resources that require additional processing to extract liquid petroleum. Oil production from tar sands in Canada and South America would add about 600 billion barrels to the world's supply and rocks found in the three western states of Colorado, Utah and Wyoming alone contain 1,500 billion barrels of oil. Worldwide, the oil-shale reserves could be as large as 14,000 billion barrels - more than 500 years of oil supply at year 2000 production rates.
It is true that in the long run, an economy that utilizes petroleum as a primary energy source is not sustainable. However, sustainability is a chimera. Every technology since the birth of civilization has been replaced as people devised better and more efficient technologies. The history of energy use is largely one of substitution, from wood and whale oil in the 19th century, to coal by the 1890's. Coal remained the world's largest source of energy until the 1960's.
No one can predict the future, but the world contains enough oil to last beyond 2100. Only fools would try to anticipate what energy sources our descendants will utilize that far in the future. Over the next several decades the world likely will continue to see short-term spikes in the price of oil, but these will be caused by political instability and market interference - not an irreversible decline in supply.
Sterling Burnett is a senior policy analyst with the National Center for Policy Analysis.