Oil's Well

The good old Economist magazine makes the argument last week that we are not running out of oil. (Economist, April 22, pp. 65-7). Here are the facts:

- Only one third of known, accessible, conventional oil reserves have been pumped.
- Many parts of the earth have not yet been explored for oil.
- This does not count tar sands and shale oil. The US, Canada, and Venezuela have more oil, if these deposits are included, than does Saudi Arabia currently.
- This does not count fully two thirds of even known conventional oil, which is not recoverable by current methods; but may well be in future. Indeed, the only way this will not be exploited is if all development of oil technology comes to a full stop. The only way this would happen is if we no longer need oil.
- At the current price of oil, oil stocks can be profitably supplemented by other forms of energy. At $70 a barrel, ethanol, oil-from-gas and oil-from-coal become attractive. Indeed, they are viable at any price above $40.

Put all this together, and it is even unlikely that oil can remain at the current high price. It should start declining toward the $40 level as more alternatives come on stream.