Energy industry: Oil crisis years away
By COLIN HICKEY
Larry Goldstein, president of the Petroleum Industry Research Foundation Inc., makes his living by studying the oil industry and reporting what he finds.
He has yet to announce that world oil production is headed downward.
But Goldstein is familiar with Hubbert's Peak and calls it a valid construct conceptually -- Goldstein's foundation is an independent group that researches and analyzes the petroleum industry.
"(Oil) is a finite natural resource," Goldstein said from his New York City office. "Are we running out of oil in the broadest sense? Yes, we are. Absolutely."
But the question, he said, is when world oil production will begin its downward slope.
"It is a serious issue because oil is critical for global economics and U.S. economics," he said.
Serious enough that the Petroleum Industry Research Foundation joined forces with the James A. Baker III Institute for Public Policy to host a conference titled "Running on Empty? Prospects for Future World Oil Supplies" back in November 2000.
The conclusion at that time was that the world had entered "an oil supply situation that is more precarious than at any other time since the 1973 oil shock."
Conference participants, however, rejected the Hubbert's Peak viewpoint and instead argued that "the oil market's current tight supply situation stems mainly from transitory political and other factors and does not reflect evidence that we are "running out of oil."
Goldstein said his own view has shifted from faith-based believer that oil is still plentiful enough not to worry, to a full-fledged agnostic.
"I don't know," he said. "There is nobody who knows."
Still, Goldstein said, a distinction should be made between resource constraint and effort constraint in regard to oil production.
The former refers to the remaining supply of untapped oil. The latter refers to the effort taken to extract that untapped oil.
Oil, he said, is difficult to extract from its underground wells. In most cases, only about 35 percent is collected. The rest, he said, stays in the ground, the cost of harvesting too exorbitant to make economic sense.
With the price of oil continuing to rise, however, Goldstein said, oil companies might soon have a financial incentive to revisit their existing petroleum holdings.
And that, Goldstein argued, could have a considerable impact on Hubbert's prediction, as could discovery of oil reserves Hubbert did not anticipate.
"What I'm suggesting is we probably have a lot more time than those on the Hubbert wavelength are suggesting," he said.