People who fret over headlines such as “World’s oil problems are only going to get worse” must be growing downright panicky over recent news reporting on oil reserves.
One particular case that has gained worldwide attention involves Shell. The oil company cut its estimates of proven oil and gas reserves by one-third in the past year, drawing a wave of media attention. But two years ago, when Canada changed its estimated oil reserves by 35 times as much, there was barely any coverage by the press. How could this be? Could it be that while Shell’s reserves sank, Canada’s actually rose?
And this wasn’t your everyday increase. Oil reserves skyrocketed in Canada by 35 times their original amount. This is quite remarkable, since the massive jump in reserves, from about 5 billion barrels in 2000 to 180 billion barrels several years later, could provide the U.S. oil for decades to come.
The reason for this incredible jump was the Canadian government’s addition of the Alberta “tar sands” to its previous oil reserve estimate. From the tar sands, a form of heavy oil can be removed by relatively unconventional processes. These processes, often compared to a gigantic crock pot, separate out the bitumen (the heavy oil) and turn it into lighter, usable petroleum. Since these technologies are steadily improving, all the available oil from the sands (more than 1 trillion barrels) might eventually be removable.
Perhaps Canada’s changes received less attention because Americans tend to give Canada scant notice. On the other hand, when Shell cut its oil and gas reserves by one-third, there was a blizzard of stories. Some of the reports questioned where major Western oil companies, and the world for that matter, will turn to find more oil. Many analysts think there isn’t anywhere left to turn. A Swedish research team saw the world’s oil reserves as 80 percent less than has been predicted.
“The decline of oil and gas will affect the world population more than climate change,” one researcher said. Another expert said, “Oil is a fabulous nonrenewable substance that underpinned the 20th-century miracle, but miracles rarely happen forever.”
Those who think oil production is about to precipitously decline see their views confirmed by companies which, like Shell, have downgraded their reserve estimates.
A spate of books have come out to support these claims: “The End of Oil: On the Edge of a Perilous New World,” “Out of Gas: The End of the Age of Oil” and “The Party’s Over: Oil, War, and the Fate of Industrial Societies.”
Many advocates have begun crying for more government investment in alternative energy sources. Others push for “energy independence” to supposedly avoid the high costs of oil, not to mention its alleged environmental effects. If these goals are not met, some predict major world wars will be fought over dwindling petroleum resources.
If such alarmists were honestly concerned about a reduction in oil, they should have applauded Canada’s re-evaluation of its tar sands. Instead, their skewed perceptions of the situation persist. They claim these new sources of oil are so expensive to extract they might ruin our economy.
The reality is far brighter. The costs of removing oil from the sands have gone down as new innovations have made it more economical. Peter Huber and Mark Mills, authors of the newly released book “The Bottomless Well,” note that oil extraction from the Alberta sands is not “especially difficult or expensive.”
What makes the endeavor risky is that “prices gyrate and occasionally spike… not because oil is scarce, but because it’s so abundant in places where good government is scarce.”
This abundance has caused companies to wonder if their higher-priced tar sands oil will be competitive. However, once the initial investments are made and the refineries are operating, the risk is eliminated, say Messrs. Huber and Mills. If so, America could very soon be receiving a steady supply of black gold from the sands.
It is baffling that newspapers and magazines have failed to publicize the increase in Canada’s oil reserves, of more than 100 billion barrels, while rushing to cover one oil firm’s negative reassessment of less than 6 billion barrels. Numerically speaking, the Alberta tar sands’ numbers tower over the Shell statistics by almost 170 billion barrels.
There’s an old adage that “no news is good news.” In today’s world of fear-injected reporting, the principle should perhaps be restated as “good news is no news.”
Only in the modern media can a 6 billion barrel decrease get a ton of coverage while a massive 35-fold increase of 175 billion barrels gets only an ounce. Perhaps that proves really good news is absolutely no news at all.
Adam S. Chamberlain is a research assistant with the Competitive Enterprise Institute.