By Alex Epstein
Why are the “experts,” so often wrong, and what can be expected for the future?
One reason is that the “experts” routinely neglect or underestimate the capacity of the human mind to discover better methods of locating and extracting oil. In industry parlance, they falsely equate “proven reserves”—the amount of oil that is known to exist and be extractable in the present—with future production: the amount of oil that will be known and be extractable in the future.
This is a fallacious tactic. As a rule, in the future companies will have the knowledge and economic incentive to discover and harness oil that they do not have the knowledge and incentive to discover today. Oil companies locate new oil supplies as and when it makes sense to do so given their production projections and given market supply and demand. They have no way of knowing the total amount of oil that exists in the earth, and no need go to the expense of finding and validating any given new deposit until it is profitable to do so.
Over time, as demand increases and/or previous reservoirs becoming exhausted, the industry locates new oil and discovers new and better ways to extract it. For example, oil companies can now discover deposits thousands of feet below the ocean floor using 3-D magnetic imaging; they can extract many times the oil from a reservoir that they once could, using methods such as horizontal drilling or high-pressure gas and water injection; today’s “easy oil” was yesterday’s “impossible” oil.
Follow-up thoughts on “The 6 Myths About Oil”
by Alex Epstein