Slides and Podcast at bottom….

Today, I want to do something a little bit different and instead of talking about entrepreneurship, I want to give you one of my most popular lectures.  The Podcast has more detail than this write-up…..

This lecture is about oil and it’s called “The Scarcity Myth.”  The thesis of the lecture is that we will never, in 1 billion years, run out of oil.  I know that everyone off the top of their head thinks that this is a crazy idea, but I hope that I can convince you that, in fact, oil is a commodity that is as plentiful as air and something that is God-given for us to use.  I will divide the lecture into two or three different days, because it’s quite long.

I want to talk a minute about the different things that I will be discussing in this lecture. Please see “the agenda” in the slides.

So let’s dig in, first with a little bit of background. I want to make it very clear that I am an environmentalist. I love the environment. I love going outdoors. I love waterfalls and fields of green grass and trees. I live in a place that has as many trees around it as possible, so I look out my window and see beautiful trees. I love the fall. I love snow skiing and I love being out in the wilderness. I consider myself an environmentalist, however, I also consider myself a realist. I believe in economic growth. I believe in having enough energy to survive and to have a good economic system in an expanding economy. So many assume that environmentalists are only the people who care, but many times they are in favor of stopping economic growth.

Some more background: a couple of statistics just to get these out on the table.  Please see the slides or refer to the Podcast for more detail.  Is it possible today that science is wrong when it talks about fossil fuels?  Are we so arrogant to believe that just because we’re in the 21st century that we’ve gotten it right and it couldn’t be wrong?

Finally, the Department of Energy the Department was created by Jimmy Carter in 1977, with the goal being to lessen our dependence on foreign oil.  Of course that hasn’t happened at all, and they now spend $24 billion a year with 16,000 employees and another hundred thousand employees on contract. Could anyone tell me what the Department of Energy does?   It certainly has not been filled its goal of decreasing our dependence on foreign oil.

So let’s move now to our first point, reviewing the history of predictions for oil’s end.  Please see the slides of listen to the Podcast to see all the prediction’s for Oil’s end.  In short,  we’ve been predicting that we were to run out of oil since the day we discovered it.  Pay particular attention to a Shell employee named Hubbert.  He came out with the idea that there is a bell curve of production and that we are very quickly approaching the peak of oil production.  He proposed that we would start having decreasing oil production in the 1970s, and it was proven true for the United States.  Since the 1970s, we have been producing less and less oil in the United States, but that raises the question, “Why are we making producing less oil in the United States?”   Is it because we are running out of oil or is it because the environmentalists won’t let us drill anywhere and get the oil that we do have here in the United States.  We will hear a lot about Hubbert and his famous peak theory later. 

Colin Campbell wrote a book called “The Coming Oil Crisis” and in that book he predicts “war, starvation and economic recession, possibly even the extinction of Homo sapiens” – the human beings.  All because we’re going to run out of oil.  My question then is, as I wrap up point number one, is when do these people ever get held accountable?  Do we ever go to the oil intelligencia and say guys “You’re just wrong.   You predict that oil will run out, but you have no evidence.”   I love the quote from Prof. Adelman of MIT who says “that just as the Stone Age did not end for a lack of stones, the oil age will not end because of the scarcity of oil.”  My thesis is again that we will never run out of oil.

There is something called the life index which is the ratio of proven reserves to current production. Or at the current grade of use, how long will it take us to use up the amount of oil that we have.   In 1948, that life index was 23 years. Today most geologists believe that the life index is 43 years, or that we have about 43 years of oil left.   We’re going to look into that number and see if we really believe it.

How much energy do we have now?   How much oil and other energy sources?   First let’s look at oil in 1980 (see above). We had about 600 billion barrels of oil left in the world.  Of course since 1980, we all been driving around, heating houses, using up tons of oil in our cars, using oil to produce all the plastics and paints and so if any of the environmentalist or the oil geologists are correct, we should have less than 600 billion barrels of oil today.   In fact today, we have about 1.2 5 trillion barrels of oil left.  In other words for the last 25 years we’ve been using oil at an incredible rate, but you know what, we have more oil today , double the amount, that we had in 1980.  When was the last time an oil company told you that?

Every year, proven reserves of oil is increasing by about 3.75 to 4%.  Every year we find 4% more oil. If you read the paper, you see it all the time.  They just discovered a huge tract of oil off the coast of Brazil which may have as many as several trillion barrels. In the Gulf of Mexico, they now think there could be several trillion barrels of oil.  Montana officials just announced that they’ve discovered huge tracts of oil.  We are finding more oil all the time, but of course they don’t want you to know that because if you knew that they were finding oil all the time, would you pay four dollars a gallon?

Then the question then is how fast are we using it up?  Every year we use about 2 to 3% more than we did in the preceding year, and 2 to 3% is less than 4%, which means the amount we have left over is increasing every year at 1 to 1.5%.  We have more oil every year even though we are using more oil, and that’s just counting the liquefied form.  We also have 6000 trillion cubic feet of natural gas and that amount has gone up 10% since 2004.  I don’t even know what 6000 trillion is called, is that a bazillion? A zillion?   They have buses that run on natural gas here in Atlanta, the Marta buses.  Lots of them run on natural gas and we have 6000 trillion cubic feet of it, and we’re concerned about running out of energy!

The United States has 31 billion barrels of oil and 231,000,000,000,000 ft.³ of natural gas on federal lands, not in the entire United States, but just on federal owned land.  In addition to that, the United States has about 15 billion barrels of oil and 60,000,000,000,000 ft.³ of gas offshore in areas that current government policies prevent us from exploring.   And this is amazing!   The United States has 86 billion barrels and  420,000,000,000,000 ft.³ of gas offshore that is currently under explored.  In other words that is oil and gas that is we know is there but we’ve made no plans to go get it.

This brings up a really important point.  We have 43 years of proven reserves.  Proven reserves is a phrase with the definition. Words have definitions.  Proven reserves is a phrase with a definition:  if there is not an oil well drilled into the oil basin, it does not count as part of proven reserves.  We have almost 100,000,000,000 barrels of oil not allowed by the rules of our government to be counted.

In the continental United States, we have, in addition to the figures I was just talking about, something called oil shale.  Oil shale is basically dirty oil, oil that has earth mixed into it.  Sometimes rock has to be taken out of it.  Up in Canada right now T. Boone Pickens is doing a tremendous amount with oil shale. You go and dig up an entire acre of land to send it through a huge machine, extracting oil from it and then you put the dirt back into the hole.  Some environmentalists hate this process because it is very, very destructive to the earth, but you know what nothing grows in oil shale.  It’s too dirty for plants to actually exist there.  Once you take the oil out and put the dirt back into the hole, you end up with usable land and environmentalist are upset!   Colorado, Wyoming, and Utah have 800 billion barrels of oil shale, which is more than all of the oil in Saudi Arabia!!   And we’re told that we could not be energy independent!!  The  United States could be energy independent if we wanted to.  Also this oil can be profitable at about $25 a barrel.  Right now we’re paying $60 or $70 a barrel.

ANWR  is the Alaskan oil reserve, the big fields in Alaska that you hear about in the news all the time. ANWR has 10.4 billion barrel barrels of oil, or twice the amount of Texas, and is currently illegal for us to go get.  The proposals ask for 2000 acres, which is less than the size of your average airport, 2000 acres of the 19,000,000 acre preserve will be used to drill for oil.  And look at the revenue that would be created by drilling in ANWR.  Billions of dollars for the government to spend and a trillion dollars that would not leave the US and support terrorism.  This is true for all of Alaska.  Billions of barrels of oil that we are not allowed to get.

To learn about the role of methane, coal and nuclear power, please refer to the Podcast.

That’s all for now.  I will continue to build my case tomorrow.  And listen to the Podcast, as it has more detail than this blog…

 

 Oil Myth [30:58m]: Play Now | Play in Popup | Download