Another CNN Money article examines the question of peak oil, which I've written on here and here within the past few months. There are a few eye-opening quotes from oil industry executives:
"An oil crisis is coming, and sooner than most people think," said John Hess, chief executive of Hess Corp (HES, Fortune 500)., the integrated oil and gas company with 2006 sales of $29 billion. "All oil producers are not investing enough today."The question is how those three billion barrels are stored: are they heavy crude? Shale oil deposits? Far below conventional drilling limits at around 5 miles?
Rising income of consumers has propped up demand even as crude prices have spiked five fold in the past six years. Hess offered some perspective: On a unit-to-unit basis, oil is still about 10 times cheaper than a Starbucks latte.
Runaway growth in oil use in India and China - the two countries are expected to boast a combined 1.2 billion vehicles by 2050, up from 20 million a few years ago - is expected to push demand above supply sometime between 2015 and 2020, Hess said.
"It's not a matter of endowment, it's a matter of investment," he said.
A small but growing number of analysts disagree with Hess' assertion that there is enough oil in the ground. They say production of oil has peaked or will peak soon, followed by a slow but steady period of decline that could cause major social unrest.
Oil executives, while acknowledging that crude deposits are ultimately limited, said that new technologies should keep crude production rising for at least several decades.
"Many perceive the supply challenge as one of scarcity," said Mark Albers, a senior vice president at Exxon Mobil (XOM, Fortune 500). "There is no question oil is a finite resource, but it's far from finished."
Albers pointed to a U.S. government survey saying the world has three trillion barrels of oil left - compared to the one trillion used so far in history.
Many of these reserves would be more expensive to produce than the current price of oil would make profitable. Obviously, if we narrow our supply down to these reserves, the price would escalate further and make recovery economically feasible. However, at those same prices, producing energy from alternative and renewable resources would be morally, environmentally and economically superior.
Even as they claim that there is still plenty of oil left, they ignore the essential question of whether the rate of production can keep up with the rate of demand. The short and simple answer is...no.
Later in the article there are some admissions from executives that the oil industry will have to play a positive role in addressing climate change. They sound more realistic than the chimp-in-chief...whose days, by the way, are thankfully numbered:
