Oil is Not Scarce -- The Oil Industry Continues to Play Us For Fools

Oil is Not Scarce -- The Oil Industry Continues to Play Us For Fools

Oil industry executives have launched an especially vigorous public-relations campaign trying to polish up the image of an industry that Sen. John McCain recently likened to approaching that of a "satanic cult." The usual rationalizations are being trotted out: "We're still recovering from Katrina," "A new hurricane season is upon us," "Iran presents a threat," "Nigeria cutoffs are having an impact on supply," "We are prisoners of global events," "Prices merely reflect the market," "Capacity is strained," and on.

Most ominously, in sotto voce, as though delivering bad news to a concerned family member, the industry argues that the world is running out of oil and that shortages are imminent. Industry spokesmen also imply, without saying so directly, that mile long lines could form at your filling station any day now. That, they try to make us understand, is why the market is so jittery, with oil prices jumping every time a pipeline leaks. The only trouble is that it isn't true. Oil, and permit me to underline this, is not scarce!

That is one of the most important facts in our world, and hardly anyone you meet will believe it. Most people have been bamboozled by the oil industry led by its flacks, by compliant analysts (read Daniel Yergin et al), by peak oil spinmeisters, a snoozing press, and the heavy artillery brought to bear by the Organization of Petroleum Exporting Countries (OPEC), which works overtime and spends big to make us believe in the myth of scarcity. That keeps prices high and oilmen rich, while the rest of us pay and pay and pay.

Even by the industry's own figures, which are surely understated given the restrictive Securities and Exchange Commission (SEC) reporting constraints. Proved reserves of oil around the world were pegged at 1.2 trillion barrels as of 2004, a humongous supply. And that figure doesn't include even vaster deposits of oil that will come on the market as technology makes it cheaper to extract. But before we go there, consider the following: In 1970, OPEC purportedly had 412 billion barrels of reserves. In the subsequent thirty years they claim to have pumped 307 billion barrels. They now claim to have some 820 billion barrels in reserves. In a world where pumping billions out of the ground seems to increase the billions still remaining, we are left to wonder where the real truth lies. To point to another anomaly, commercial stocks of crude oil are some 10 percent higher today than they were a year ago, yet the price of crude is some 40 percent higher than it was then.

And there are other sources that must be counted:

• Canada's tar sands are immense. The conservative estimate of oil saturating the province of Alberta is 175 billion barrels. Producers have been working for years to lower the cost of strip-mining the deposits, grinding it up, separating the tar-like bitumen from the sand, and refining it into synthetic crude oil. These days, all that can be done for about $20 a barrel -- providing nifty profits at today's market price, which hovers around $70/bbl. And sure enough, Chevron Corporation has just announced it will spend well over $1 billion for a vast new project to produce more than 100,000 barrels a day from the oil sands.

• Offshore drilling can now be done in waters as deep as two miles, with the oil deposits five to six miles below the ocean floor. Thanks to innovative drills, new information technology, and sophisticated undersea robots, oilmen now have access to an estimated 300 billion barrels of previously untappable oil.

• Sensor technology, seismic surveying and specialized software promise to open up another 150 billion barrels of reserves. The Pod, a supercomputer-powered exploration system designed by a software subsidiary of Halliburton Corporation, creates astonishingly detailed 3-D seismic models that are viewed on an IMAC-style 45-foot screen and take most of the guesswork out of drilling for oil.

• Old oilfields still hold hundreds of billions of barrels that were thought to be unrecoverable in the early days. Wells that have been abandoned as depleted may contain as much as 70 percent of the oil originally there. Advanced recovery techniques range from the obvious -- pumping in water or carbon dioxide to increase pressure in the well -- to the exotic: These days, wells can be filled with bioengineered microbes that release oil stuck in microscopic cavities.

• But the big new source will be oil shale, vast quantities of sedimentary rock in the western United States that contain an awesome 2.6 trillion barrels of oil. In the past, efforts to get it out have foundered on technological problems. Now, new methods are being developed: Drilling holes into the shale, heating the rock to 700 degrees to cook out the oil, and pumping it to the surface. In reasonably short order it can be expected that high-quality crude can be extracted from shale for circa $30 a barrel.

In all, researchers at the U.S. Geological Survey estimate that these new sources could add as much as 4 trillion barrels to proved reserves -- giving us a more than ample cushion to develop alternative fuels and technologies at today's rate of consumption.

What is scarce is honesty, transparency -- OPEC countries won't tell us the extent of their reserves other than leave us with the orchestrated impression that things are worse today then they were yesterday, nor will Russia tell us about their reserves as such information is a State secret -- and the urgent need of an invigorated and vigilante press weaned off regurgitating oil patch press handouts.

Please understand this is not an argument for greater consumption. Everything needs be done to wean us from our addiction to fossil fuels no matter what the level of supply. What we also need is to understand that we have to end this con game that has enriched the pusher beyond his wildest dreams, and to the point that we are now expected to say thank you every time we get a fix. It is time to call his bluff and to do all we can to push down the price of crude oil and to make ourselves energy self reliant. We must stop enriching those in league with the con artists and pushers, meaning the oil patch in general. We must stop complying with one of the greatest rip-offs in history. We must wake up and respond to the actual facts, not the ones the oil patch, their paid lobbyists on "K" street, and an overly compliant government want us to believe. Sad to say, in this scenario, market forces have been corrupted, wherein, as example, we are transferring over $70 a barrel to oil producers for a commodity that costs them less than $1.50/bbl to produce (as in the majority of OPEC production costs). This issue is too important to our future to continue accepting the pushers rap as gospel.