Oil Smackdown

Daniel Yergin, author of The Prize, The Epic Quest for Oil, Money and Power, reassures us that we’re not running out of oil yet. The capacity to produce oil (as distinguished from actual production) is actually going to increase approximately 20 percent over the next five years. Where’s it all going to come from? Just listen:

The largest non-OPEC growth is projected for Canada, Kazakhstan, Brazil, Azerbaijan, Angola and Russia. In the OPEC countries, significant growth is expected to occur in Saudi Arabia, Nigeria, Algeria and Libya, among others. Our estimate for growth in Iraq is quite modest -- only 1 million barrels a day -- reflecting the high degree of uncertainty there. In the forecast, the United States remains almost level, with development in the deep-water areas of the Gulf of Mexico compensating for declines elsewhere.

James Howard Kunstler smacks down this logic (look for the August 1, 2005 entry, it’s not permalinked), noting that Yergin is a little light on key details – for example, several of the oil fields mentioned have peaked and are being extended with tertiary extraction methods, which increases depletion as well as costs. Or, that many of these new sources of oil, such as tar sands or ultra-deep ocean drilling, are expensive and inconsistent with

. . . cheap oil that enables America's "non-negotiable" easy motoring way of life, and the debt-fueled suburban sprawl-building economy that has evolved to serve it. . . .

Or that oil reserve statistics for Saudi Arabia are closely held secrets, so that it’s questionable to conclude that more oil will flow from the Saudis. Kunstler mentions that Matthew Simmons’s book, Twilight in the Desert, makes the opposite point that the Saudis have maxed out their production. Not that he knows any better, but we might be advised to think about this issue sooner rather than later.

Or that much of that oil is in the hands of now unfriendly nations, thanks to what passes for statecraft by the Bush Administration.

I guess the operative word is we’re not running out of oil now. So, are we going to wait for the market to signal us as to the proper time to restructure our economy to avoid major disruptions? That could be extremely disappointing.