The Real Shortage
The Wall Street Journal’s week-end edition titled the Review section by a piece from Daniel Yerkin. Yerkin is a petroleum historian who authored the book The Prize. Yerkin titled his article, “There will be Oil”. The lean of the article is petroleum security. In other words, we will never see the last drop.
Yerkin cites the technological improvements in extracting oil. That applies to the oil fields in North Dakota where production jumped from 10,000 barrels a day to 400,000 barrels a day now. Big difference ! Our foreign oil imports peaked at 60%, but are now 47%.
Yerkin seems to doubt Marion King Hubbert’s thesis that oil production will recede to the point of not being useful for energy needs. “Hubbert’s Peak” has been the standard gage for decades. He does concede that Hubbert got the U.S. production peak year (1970) on the money.
What did Yerkin’s article not tell us ? He did not tell us there is an emerging world behind China, India, and Brazil. They too, will need oil from the world market. If this demand exceeds supply the price will not return to historic levels. There is also a cost factor for extracting the “tight” oil which will drive the cost to unacceptable levels. It is not so much that we will run out of oil, but rather, we will run out of affordable oil.
The price of gasoline was $1.50 per gallon just 10 years ago. American lifestyles, associated with the current high pump prices, have only marginally changed from historic trends. Also, Americans still use 25% of all oil; more than the entire European Union. So, the current high prices continue to erode disposal income for most Americans. In other words the high energy prices are making us poorer and poorer. Petroleum efficiencies, which Yerkin mentions, could make some difference. But, these efficiencies, until now, have been resisted be the transportation industry. It is about economics and oil is still finite, even if the earth still contains 5 trillion barrels. I think we will discover that less and less petroleum is easily extractable.
We have two options: (1) change our lifestyle, or (2) adopt a more efficient mode of travel. If option (2), this must be a rapid evolution. No dragging it out for 25 years. There will be inconveniences and sacrafices to get this energy problem straightened out.
Energy transition for Americans needs leadership and leadership is in far less supply than petroleum.
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