pretty much acknowledge the fact that we may be on the homestretch
as far as oil supply is concerned. The main points they make are that
they are doing something, they are concerned about oil depletion and
global warming, and they are looking for new production as well as trying
to come up with alternative fuels.
The interesting thing about this debate is that it’s become political.
Where you stand depends very much on which forces you consider dominant
in controlling the oil markets. Is discovering more oil the only way
to increase production capacity? And what about the fact that not much
remains to be discovered, besides a few areas in arctic Russia, offshore
West Africa, and Brazil. “The economists all think that if you show up at
the cashier’s cage with enough currency, God will put more oil in
ground,” Deffeyes told the Associated Press a while ago.16
One of the reasons this debate has become more intense is the fact
that oil prices are high, which is a warning sign of what is to come, and it
won’t be pretty. Prices will rise dramatically and become increasingly
volatile. And with little or no excess production capacity, minor supply
disruptions—political instability in Venezuela, hurricanes in the Gulf of
Mexico or labor unrest in Nigeria, for example—will send the oil markets
into a panic buying and the prices will shoot into the stratosphere.
So will periodic admissions by oil companies and petroleum-rich nations
that they have been overestimating their reserves.
Here’s the good part: oil producers—companies and countries—won’t
lose out. Instead, their boom will grow. On the other hand, because the
price of oil ultimately affects the cost of just about everything else (and
the economy in general), inflation like the kind we saw in the 1970s will
return. If you’ve been paying close attention to the news lately, you may
be feeling a little nauseated already. Does that mean that $6-per-gallon
gas is right around the corner? You bet. We saw $5 gas already in the
wake of Katrina in some parts of the country such as Georgia and the
Midwest.
During Hubbert’s time, he started his analysis by collecting data on
how much oil had been discovered and produced in the Lower 48 states,
both onshore and offshore, between 1901 and 1956. Alaska’s oil wealth
was still not known to petroleum geologists at the time. His data showed
that U.S. oil reserves had risen rapidly between 1901 and 1930, then
more slowly after that. When he graphed that pattern it appeared that
36 THE END OF OIL