Cheap-Oil Era Is Far From Over, Analyst Says

Brian Handwerk
for National Geographic News
May 20, 2004

Everyone agrees that Earth's oil supply is limited—but just how close are we to running out? Some experts predict an irreversible shortage within a few years.

But at least one analyst argues against the premise of the new National Geographic magazine cover story, "The End of Cheap Oil." Leonardo Maugeri, an economist and oil industry analyst with the Italian oil and gas company Eni S.p.A., says that new technologies and underestimated reserves mean that the sun is far from setting on the oil age.

Concern about oil droughts is nearly as old as the petroleum industry itself.

"As a matter of fact, those fears began long before oil became a critical fuel," said Maugeri, whose new report on the subject will be published in the May 21 issue of Science.

"In the 1860s, soon after the beginning of oil's modern age, boom-and-bust phenomena marked the advent of the new era. Every boom [caused] an increasing fear of running out of oil, leading to overspending in oil production and refining. It was this situation that led John D. Rockefeller [of the Standard Oil Company] to decide to avoid deadly competition in the market by eliminating his competitors," Maugeri said from his Rome office.

In 1919 United States Geological Survey (USGS) head George Otis Smith even predicted that the nation would be out of oil in nine years.

Smith's prediction was false, as were other dire warnings that were followed by supply bonanzas. But not all cautionary oil predictions have been wrong.

On Hubbert's Peak

One popular model used for predicting oil supply and shortage is based on the work of geophysicist M. King Hubbert. In 1956 Hubbert calculated that U.S. oil production would hit its all-time peak in the early 1970s. Though many ridiculed the proposition, Hubbert turned out to be right.

Now analysts are using Hubbert's formulas to predict when worldwide production will hit its irreversible peak. They conclude that the global peak in oil production is just a few years away. If it happens, supply will be unable to keep up with rising demand.

"I'm predicting that the smooth curve of oil production will peak on Thanksgiving 2005," said Princeton University professor emeritus Ken Deffeyes.

Deffeyes, a geologist by training, is the author of Hubbert's Peak: The Impending World Oil Shortage. He once worked with Hubbert at the Shell oil company's Houston, Texas, research lab.

Continued on Next Page >>


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