July 05, 2012
Some advice for Harvard’s public-relations staff: Don’t announce
a groundbreaking study on the eve of a rabidly anticipated ruling by the Supreme
In fairness to the university’s flacks, the slowest of news days
wouldn’t have lured the legacy-media spotlight for “Oil: The Next
Revolution.” After all, while the paper was released as citizens rapturously
awaited the outcome of National
Federation of Independent Business v. Sebelius, it dares to debunk a sacred
precept of America’s
Leonardo Maugeri is responsible for the blasphemy. “Oil
is not in short supply,” the former Eni
executive explains. “From a purely physical point of view, there are huge
volumes of conventional and unconventional oils still to be developed, with no
‘peak-oil’ in sight.”
Barring a worldwide economic collapse or planet-killing asteroid
strike, most of the nations that now provide petroleum will put more of the stuff on the market by 2020.
Maugeri believes, has the potential to grow its current meager contribution by
5.1 million barrels per day (mbd). Brazil is likely to add 2.5 mbd.
The combined net increases of Nigeria
could surpass 1 mbd. Saudi Arabia,
the United Arab Emirates,
will boost their exports by a total of 2 mbd.
But the U.S.
is where the data start to drop jaws. Maugeri’s scenario has The Land of the
Free’s crude ballooning by 3.5 mbd by 2020. Much of this black gold, as the
research division of Citigroup Global Markets noted in a February report, stems
from “shale oil plays, in North Dakota (Bakken), Texas (Eagle Ford and Permian
Basin) and … in a half dozen other areas including Colorado, Wyoming, Utah and
In other words, Hubbert’s Peak is about to implode.
M. King Hubbert, a 20th century geologist, is the Pontiff of
Peak Oil. In the 1950s, he estimated that America’s
flow of Texas Tea would max out between 1965 and 1970. Initially ridiculed, as
the years passed, the scientist appeared to be a genius. In 2004, Fortune claimed that Hubbert “predicted
the drop-off in U.S.
oil production with scary accuracy.” (The apogee arrived in 1970, at 9.6 mbd.)
It’s now clear that Hubbert wasn’t smart, but lucky. His
prognostication proved true due to factors he didn’t foretell. The 1970s featured
stagflation, environmental regulations, and fedpols’ refusal to grant access to
oil-rich properties, such as the Arctic National Wildlife Refuge and portions
of the Outer Continental Shelf. Super-cheap imports in the 1980s and 1990s further
disincentivized domestic firms.
But a new century brought soaring prices -- a barrel nearly hit
$150 in 2008; we’re not much below $100 today -- and unconventional crude became
worth the effort. Today, enhanced oil recovery brings geriatric wells back to
vigor, “fracking” makes previously ignored rock formations gush, and offshore
rigs are moving farther out to sea. Maugeri thinks that in 2020, the U.S. will soar past Hubbert’s Peak, hitting 11.6
mbd -- ahead of Russia, and within
striking distance of Saudi
With tar-sand production booming for our neighbor to the north, there’s
a strong probability that the U.S.-Canada economy -- trade-wise, few nations
are as integrated, and it’s proper to think of the relationship as a single
unit -- will soon become self-sufficient in petroleum.
Who loses from what Maugeri calls “a tectonic shift in … oil
geography and geopolitics”? The incongruous gaggle of ideologues, rent-seekers, threat-inflators,
who’ve made careers, and booked countless media appearances, from peddling Hubbert’s
specious theories and/or irrational fears of
U.S. “dependence on OPEC.” The rogue’s gallery of energy alarmism is
crowded, although the Pickens Plan, Set America Free Coalition, National
Commission on Energy Policy, United States Energy
Security Council, Apollo
Alliance Project, and Energy
Future Coalition garner the most attention.
Ignorant not only of resource
economics, but the history of energy and the technology of hydrocarbon
exploration/extraction, Hubbertians and their popularizers will take the demise
of imports hard -- that is, if they acknowledge the development at all.
In 2006, echoing decades of balderdash offered by her willfully
clueless colleagues, Newsweek’s Jane
Bryant Quinn wailed that crude demand “is expected to rise much faster than new
supplies,” and “most producer nations can’t find enough new oil, or drill out
more from their reserves, to replace what we’re using up.”
Clear-eyed analysts have long known that the world is awash in
oil, and that free markets and relentless innovation will ensure that enough of
the vital resource is on hand until its inevitable
Somewhere, M. King Hubbert is feeling very foolish.
D. Dowd Muska (www.dowdmuska.com) writes about government, economics, and technology. Follow him on Twitter @dowdmuska.
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