The Energy Report for Tuesday, June 5, 2007

…As a well known long time oil bull many people assume that I am a believer in the Peak Oil theory. That at some point we would be at an oil production peak and we will soon run out. Peak oil is almost a religion among its believers and they are as devoted to it as the hard core Al Gore like global warming is the end of mankind as we know it crowd. The truth is that the belief I hold is that the market and ingenuity will eventually solve both problems.

As for oil when the price gets high enough and so called traditional production starts to peak we will look to non-traditional sources of oil and we will find ways to be more efficient with the oil we have. And the non traditional oil sources are dismissed but the hard core Peak Freaks when they do their calculations. Take for example a story that was written by Joe Carroll of Bloomberg News about one of many non-traditional energy source called shale oil. According to the story Colorado and Utah have as much oil as Saudi Arabia, Iran, Iraq, Venezuela, Nigeria, Kuwait, Libya, Angola, Algeria, Indonesia, Qatar and the United Arab Emirates combined when you take a look at shale oil which is oil trapped in limestone. And the amount of oil that is there is enough oil to according to Bloomberg is enough supply to feed the US for a century.

So why is the US still importing oil! Well because in the past it has been too expensive to produce. In fact attempts to extract oil from shale in the 1970’s were thwarted because of the price drop in the eighties. But now with higher oil prices and new technologies it’s possible that this shale oil could be coming on the market very soon. Bloomberg says that Exxon Mobil and Chevron Corp and Royal Dutch Shell are spending $100 million a year testing new methods to separate the oil from the stone for as little as $30 a barrel and that a growing number of industry executives and analysts say the new technology and persistently high prices make this idea feasible.

For Peak Freaks this is another setback, as is deep sea drilling and the oil sands in Canada. The bigger risk to world than running out of oil is government intervention in the oil market and the nationalism of oil resources. And if the world does indeed run out of oil in a hundred or so years from know if the market is allowed to work we will probably have oil forever or at least have the technology to get oil from another planet.

FX Street