OpinionJournal.com’s “Peak Oil” Rebuttal

In an unsigned, read-the-whole-thing piece, OpinionJournal.com is on a roll (may require registration; bolds are mine throughout) as it shreds the “Peak Oil” (”we’re running out of oil and life as we know it will never be the same”) arguments:

The limits-to-growth crowd has predicted the end of oil since the days when this black gold was first discovered as an energy source in the mid-19th century. In the 1860s the U.S. Geological Survey forecast that there was “little or no chance” that oil would be found in Texas or California. In 1914 the Interior Department forecast that there was only a 10-year supply of oil left; in 1939 it calculated there was only a 13-year supply left, and in 1951 Interior warned that by the mid-1960s the oil wells would certainly run dry. In the 1970s, Jimmy Carter somberly told the nation that “we could use up all of the proven reserves of oil in the entire world by the end of the next decade.”

We can ridicule these doom-and-gloom predictions today, but at the time they were taken seriously by scholars and politicians, just as the energy alarmists are gaining intellectual traction today. But as the late economist Julian Simon taught, by any meaningful measure oil (and all natural resources) has gotten steadily cheaper and far more bountiful in supply over time, despite periodic and even wild fluctuations in the market.

But won’t oil prices keep going up to the point of unaffordability?

If gasoline cost today what it cost a family in 1900 (relative to income), we would be paying not $3 but $10 a gallon at the pump. Or consider that in 1860 oil sold for $4 a barrel, or the equivalent of about $400 a barrel in today’s wage-adjusted prices. The first of a continuous series of innovations, in this case the invention of modern drilling techniques in 1869, cut the price by more than 90%–to 35 cents a barrel.

Fifty years ago people would have laughed out loud at the idea of drilling for oil at the bottom of the ocean or getting fuel from sand, both of which were technologically infeasible. The first deep-sea oil rig went on line in 1965 and drilled 500 feet down. Now these rigs drill two miles into the ground–and miraculously, the price of extracting oil from 10,000 feet deep in the sea bed today is approaching the cost of drilling 100 feet down from the richest fields in Texas or Saudi Arabia 40 years ago.

This spectacular pace of technological progress explains why over time the amount of recoverable reserves of oil has increased, not fallen. Between 1980 and 2002 the amount of known global oil reserves increased by 300 billion barrels, according to a survey by British Petroleum. Rather than the oil fields running dry, just the opposite has been happening.

Here’s a great rebuttal to the “this time it’s different” crowd:

In this industry, alas, bad news tends to crowd out the good. When Shell announced earlier this year that its oil and gas reserves were down by 30%, there was a global outcry. But when Canada announced in 2004 that it has more recoverable oil from tar sands than there is oil in Saudi Arabia, the world yawned. There is estimated to be about as much oil recoverable from the shale rocks in Colorado and other western states as in all the oil fields of OPEC nations. Yes, the cost of getting that oil is still prohibitively expensive, but the combination of today’s high fuel prices and improved extraction techniques means that the break-even point for exploiting it is getting ever closer.

The energy Malthusians counter that China, India and other nations will satisfy their growing appetite for oil by driving demand and prices ever higher. In the short term, yes. But over the longer term, as the Chinese become more prosperous through free markets, China will become vastly more fuel efficient and also help discover new sources of energy.

Finally, if there is to be a problem with oil, we know who to point the finger at:

Our point is that the constraints on our ability to find and extract new oil are not geologic or scientific. The real constraints on oil production are barriers created by government. Myron Ebell, an environmental analyst at the Competitive Enterprise Institute, notes that roughly 90% of the oil on the planet rests under government-owned land and these resources are abysmally managed.

In the U.S., environmentalists have erected myriad barriers to drilling for new sources of oil. The American Petroleum Institute estimates that there are at least 100 billion barrels that are fairly easily recoverable in Alaska and offshore that oil companies are not permitted to exploit. Once, we could afford the luxury of not drilling there. Now, thanks to a witch’s brew of unforeseen circumstances–political turmoil in the oil producing countries, China’s surge in demand, and hurricanes that have knocked out Gulf refineries–it’s an economic and national security imperative that we do.

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UPDATE: Porkopolis has more, including links to heavyweights like Peter Huber and others. He has been on the energy case for some time.
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BizzyBlog Flashback:
- August 26: I’m Tired of the Oil-Price and Oil-Supply Obsessions