FYI-
World May Have More Oil Than It Will Ever Need; Oil Supply:
There's Plenty In the World
The Salt Lake Tribune
There never was a shortage of oil. There's no shortage now. And there
probably never will be a shortage.
That may seem incredible to anyone old enough to remember the energy
crisis of the 1970s. But the world is awash in oil -- and that simple economic
fact isn't going to change for a long time.
''People have been predicting an imminent energy crisis and a collapse of
civilization as we know it for at least the last 100 years,'' said Peter
McCabe, a research geologist on the energy-resource team of the U.S.
Geological Survey.
Yet throughout this century, energy prices in constant dollars have fallen.
There may be disruptions -- the energy crisis was one of the most severe --
but oil prices, after adjusting for inflation, are near an all-time low.
Oil now sells for about $15 a barrel. In today's dollars, that's less than a
third of the price of oil at its peak. In 1981, oil sold for about $56 a barrel in
today's dollars.
Nowadays, milk costs more per gallon. So much for the prediction that the
world would run out of oil in 1992.
''Cheap energy is part of our future,'' McCabe said.
How can that be?
Well, even a finite commodity can exist in abundance.
A bigger problem may be the great supply of fossil fuels -- not a shortage.
What the widespread and growing use of fossil fuels is doing to the
environment is a separate issue, but McCabe expects advances in solar
power or hydrogen fuel cells to displace oil and natural gas before the
world's supply is depleted -- just as oil and natural gas displaced coal.
The dire predictions of yore stemmed partly from the nature of estimating
proven oil reserves, said McCabe, who was among the speakers Monday
at the American Association of Petroleum Geologists' annual convention in
Salt Lake City this week.
''Reserve and resource estimates are a matter of perception,'' he said.
''They are based on present realities or assumptions about the future, and
often those assumption about the future are erroneous.''
Sometimes wildly erroneous.
Such assumptions are not uncommon in economic history.
''People make these projections based on some deep-seated problem they
perceive and then they project those dotted lines out into the future, not
realizing that economies change,'' said Louis Galambos, an economic
historian at Johns Hopkins University.
''In the short run, you get a lot of frightening projections,'' he added, ''and
people assume it will continue in the future.''
Maybe McCabe's statements will one day seem as absurd as the predictions
that the world is running out of oil. But, remember, as supplies tighten, prices
increase. And when prices increase, oil reserves once uneconomical to
develop suddenly can be exploited.
At some price, for instance, the oil shales in Utah, Colorado and Wyoming
become economical. Those shales hold an estimated 1.5 trillion barrels of oil
-- a 300-year supply based on the current rate of consumption in the United
States.
''Markets work very well to keep supply and demand in some reasonable
balance,'' Galambos said.
The energy experts of the 1970s also could not foresee the technological
advances that would allow oil companies to drill wells far offshore, an
advance that gave birth to the deep drilling in the Gulf of Mexico, the hottest
oil play in North America.
Nor could they foresee the advances in seismic technology that would send
the success rate for oil and gas exploration soaring.
Still, a lot of people were wrong in a big way.
The North Sea, for instance, once was expected to produce its last barrel of
oil in 2000. Production now is at an all-time high.
Yet, despite the profusion of massive four-wheel-drive vehicles, the
perception lingers that someday the gasoline pumps will run dry.
Part of the perception may stem from difficulty of comprehending the size of
the world's oil and natural gas reserves, McCabe said. Comprehending a
billion barrels of oil or a trillion cubic feet of natural gas is a bit like trying to
comprehend geological time.
People can comprehend all those cars on the freeway, however.
The energy crisis also left a lasting impression on our collective psyche --
one that meshed with the pervasive sense of decline and defeat that marked
the '70s.
''All this seemed to come together at the same time,'' Galambos said.
(Copyright 1998)
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Publication Date: May 19, 1998
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