Where have all the oil optimists gone?
By Justice Litle
There used to be a group of happy-go-lucky folks who thought the price of oil was always on the verge of collapsing.
Steve Forbes seemed to be their chief. He preached that the benefits of exploration would soon kick in, that all the peak oilers were nutty, and that the return of $35 a barrel was just a matter of time.
Now those voices have quieted down a bit (maybe even a lot). So why the chastening? Perhaps it's because we've had some genuinely big discovery news in recent months, and crude oil has stayed expensive anyway.
No time like the present
When Chevron hit deepwater pay dirt in the Gulf last year, that was supposed to be the death knell for all this $100-a-barrel hoopla. It wasn't. When Brazil announced an even bigger discovery just recently -- perhaps the closest thing to a new "elephant" find in decades -- you would have expected the price of crude to crater. It didn't.
The biggest problem with Brazil's good news? Timing. As Tom Petty sang, "The waiting is the hardest part." It will be years before that new source is tapped, but the world doesn't have years. We need more oil now.
The same goes for Chevron's big score 175 miles off the Louisiana coast. It doesn't matter how many billions of barrels we're projected to have in the distant future; the pressure is on here and now. A barrel in hand is worth two in the seabed.
What Wall Street missed
As a result of all this, there is a big shift happening -- at long last -- in the way Wall Street thinks about oil.
The past few years have been dominated by the peak oil debate. Are we really going to run out of black gold? Is energy conservation the issue of our time? Was M. King Hubbert a prophet, or a fool?
And yet all the peak oil hubbub, and the intense debate surrounding it, has turned out to be a distraction from the immediate issue. That issue is a shortage of resources involved in the getting of oil.
Simply put, there aren't enough engineers. There aren't enough geologists. There aren't enough rigs or pumps or service vehicles. There aren't enough exploration sites. There isn't enough water, and natural gas to handle the huge processing demands for North American shale and Canadian oil sands. There aren't even enough truck tires! (The giant ones are truly hard to find.)
The demand for oil is so consistent and so intense that we simply don't have the means to keep up with it. Globalization has created the biggest bottleneck in the history of mankind. This bottleneck is a reality whether or not you believe in peak oil -- and so is the huge opportunity that stems from it. (I like to think of it as "infrastructure arbitrage.")
Justice Litle is an Editorial Director of Taipan Publishing Group