The Energy Crisis

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I recently came across a warning from the Interior Department that the United States will run out of oil in 13 years. Oil is one of the favorite "case studies" of population control activists who seek to prove that we are running out of resources. It is probably where we would be most likely to find a problem, as unlike most resources, oil is consumed quickly and can't be recycled -- once you burn it, it's gone.

Nevertheless, I wouldn't be too concerned about this particular warning. It was issued in 1939.

The government has not had a very good track record predicting when we'll run out of oil. They've been predicting that we just had a few years supply left since at least 1866.

In 1885 the US Geological Survey concluded that it was unlikely that any oil would ever be found in California. California has since produced about 20 billion barrels.

In 1891 the US Geological Survey concluded that it was unlikely that any oil would ever be found in Kansas or Texas. (American oil companies have foolishly ignored their own government and spent millions of dollars drilling for oil in Texas.)

Today the United States has proven reserves of about 25 billion barrels, and we are consuming about 3 billion barrels per year. So our proven reserves will last only eight more years! Pretty scary, eh?

At least until you know the definition of "proven reserves". It is the amount of oil which has actually been located, and which can be extracted from the ground economically. This is a very useful definition for an oil company -- it tells them how much oil they know they have available to sell. Of course there is oil which has not yet been discovered, but no one knows how much or whether your company will be the ones to find it or when. Also note the key word "economically". Much oil has been discovered which is in very small pockets, or very deep underground, or under the oceans, or in remote places. Such oil is sometimes not practical to extract from the ground because it would cost more to get it out than one could get by selling it. What can be extracted economically depends on technology and market conditions. If you are an oil company and you find oil which would cost $25 a barrel to pump out, and current prices are $20 a barrel, that oil is effectively useless to you. But as technology improves, the cost of extracting this oil will go down. Indeed, in close cases a simple change in price could add much oil to our stock of proven reserves.

So in fact, while our present proven reserves are 25 billion barrels, the Department of Energy recently issued a report estimating that there were at least 99 billion barrels of oil in the US which could be extracted with existing technology for $20 a barrel or less. Given their past record this is probably a very pessimistic estimate, but let's run with it for a moment. They go on to give their estimates of total reserves given reasonable technological advances, and if prices were to increase:

US Oil Reserves

Estimates from US Department of Energy

present technology new technologies
$20 / barrel 99 142
$27 / barrel 130 204

The bottom line: The US as at least 204 billion barrels of oil. That's enough oil to last us 75 years!

Still, though, we are using up our available oil. Over time, proven reserves have been falling, as oil is used up. Obviously so, right?

No, sorry, that's wrong. The following graph shows the total world proven oil reserves from 1981 to 1993.

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Worldwide Oil Reserves

Source: Oil Industry Outlook 1994, Robert Beck (editor, Oil & Gas Journal), Tulsa OK, 1994

Over the long haul, proven reserves are increasing, not decreasing. New discoveries and technological advance continue to make new oil available faster than it is burned up.

In researching this article, I was interested to note that people in the oil industry aren't worried about running out of oil to sell. They are worried about the price of oil falling as production increases faster than demand.

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Posted 10 Sep 2000.

Copyright 1995 by Ohio Right to Life
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