The first oil well in the United States was drilled in Titusville Pennsylvania in 1859. In 1901, there was an oil boom in East Texas which is what most Americans recognize from movies. That boom changed our way of life by giving us unrestricted mobility.
Ever since the discovery of oil, there have been predictions of its imminent exhaustion. A state geologist in Pennsylvania predicted that we would run out of oil in 1878.
Over the course of the past century there have been a series of equally wrong predictions, some by the US government, some by oil industry geologists, and some by academics and analytical groups. In the 1970s, the Club of Rome report and The Global 2000 report for President Carter both concluded that our domestic oil resources would be exhausted by the end of the century. At that time, global proven reserves stood at about 600 billion barrels. Since then, we have consumed over 700 billion barrels and proved reserves still exceed 1.2 trillion barrels.
How do you explain a history of erroneous predictions and growing reserves in spite of increasing consumption. The answer is simple–economics, technology, and the limits of geology. Geologists and others based their estimates on limited physical data, expectations about prices and existing technology. Our economic system is not static, it is dynamic. They also believed that the amount of oil was finite because it was believed to be the result of decaying animals and plant life. That is a hypothesis, not an established fact.
As prices have increased over time, there have been increased incentives to invest in production and techniques to squeeze more oil from existing fields. And, as long as the price of alternatives is higher than the price of producing the marginal barrel, it makes economic sense to produce more and to invest in technologies for finding and producing oil.
The oil industry employs a large number of scientists and engineers and indeed technology is as much a part of its business as basic engineering. Those scientists and engineers have developed technologies that allow for deep water drilling, drilling in hostile environments like Alaska and the North Sea, 3-D mapping and seismic technologies for more accurately finding oil, and horizontal drilling and enhanced recovery techniques for recovering more in place oil.
It is estimated that only 35%-40% of oil in place is initially produced. Advances in technology enable companies to increase recovery from those existing fields. Even without new discoveries, oil production can continue to increase, if wise, not punitive, government policies are put in place. But, there is a lot more oil to be produced from areas that still have not been explored on land and offshore. If the government would increase it leasing activities, the US could be producing two million barrels or more a day by the end of this decade.
Oil plus innovation and technology has allowed the United States to enjoy long periods of economic growth, to enjoy the benefits of mobility, and to be the world’s leader in petroleum technology. The petroleum industry and the technology it has developed are an asset to the nation. It should be encouraged to continue to develop its technologies and use them around the globe.
A clear lesson of history is that the private sector has the capital and know how to develop new, commercially viable energy technologies better than the government’s top-down, bureaucratic process that has resulted in so many failed alternative energy projects and which waste of tax payer dollars.
