Contrary to a dire warnings that oil production has peaked and "the earth is running out of oil," Daniel Yergin – chairman of Cambridge Energy Research Associates – says "There will be a large, unprecedented buildup of oil supply in the next few years."

     Yergin says between 2004 and 2010, capacity to produce oil "could grow by 16 million barrels a day – a 20% increase."

     "Where will this growth come from? It is pretty evenly divided between non-OPEC and OPEC. The largest non-OPEC growth is projected for Canada, Kazakhstan, Brazil, Azerbaijan, Angola and Russia." (Daniel Yergin, "It's Not the End of the Oil Age," Washington Post, 7-31-05, p. B07.)

     Many "doom and gloom" forecasts of "peak oil" are based upon a common misunderstanding about oil supplies.

     At any given time, the oil industry has about a 30 year supply of "proven oil reserves." The reason is that no one wants to spend money searching for oil that might not be used (or even wanted) a hundred years in the future.

     Unfortunately, a lot of people take the "30 year supply of proven reserve" figure to mean that we will run out of oil in 30 years. As Yergin points out, this is the fifth time the world has "run out of oil." Dire warnings of impending shortages like those we are now hearing were also issued just after World War I . . . the "permanent oil shortage" of the 1970s gave way to the glut and price collapse of the 1980s . . . and so on.

Despite recent price rises, we are now paying less for gasoline than people did in the 1980s or in 1935, once prices are adjusted for inflation.

      "We're not running out of oil in the ground," says James Burkhard of Cambridge.

     In fact, we may well have enough oil for many centuries.

     There are many places on earth where oil could be found – such as under the sea, under Artic tundra, or deep in the earth – but where it is too expensive to extract with present technology. However, with near-future technology, it may well be economical.

     A good example is Canadian oil sands, which may contain as much oil as Saudi Arabia, but which is only now beginning to become economic to extract.

     The bottom line: Don't worry about the world running out of oil any time soon. However, do worry about political roadblocks causing periodic shortages in supply or more price increases during the next few years. For instance, we now have a very real oil refinery shortage. As a result of the opposition of environmentalists, no new refineries have been built in the U.S. for decades.

     For more information on why warnings of "peak oil" are wrong and "Our Many Energy Alternatives," see our October and November 2004 issues in which we explain why we have at least a 65 to 130 year supply of oil.

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