Morris A. Adelman Dies at 96; Saw Oil as Inexhaustible

Morris A. Adelman, an energy economist who marshaled free-market principles and hard data in arguing that the world’s oil supply was not running out, died May 8 at his home in Newton, Mass. He was 96. The Massachusetts Institute of Technology, where he taught and researched for 65 years, announced the death on May 15.

Dr. Adelman emerged at the center of national energy debates when petroleum prices shot up after the Arab oil embargo of 1973. In 1974, the 13-nation Organization of the Petroleum Exporting Countries raised the price of a barrel of oil to $7 from $2. (Adjusted for inflation, $7 in 1974 would be more than $30 today. On Friday, crude oil was selling for $102 a barrel in the commodities market.)

To diminish OPEC’s power, Dr. Adelman advocated that the United States sow a little confusion. He proposed establishing a system of secret competitive bidding for licenses to import oil into the United States. On the basis of economic theory and experience with oligopolies, he argued that there was a good chance OPEC members would cheat on the public prices they had collaborated to set. As a result, he suggested in articles and interviews, the price of crude might drop and OPEC might unravel.

Dr. Adelman acknowledged the possibility that OPEC would retaliate against the auction system by establishing one overall selling agency. But in an interview with The New York Times in 1975, he said that in itself would be counterproductive because governments would “have the constant divisive job of haggling over market shares.”

The Mobil Corporation, now part of Exxon Mobil, ran an ad on the Op-Ed page of The Times responding to a letter he had written the newspaper. It criticized Dr. Adelman for not acknowledging the crucial role that only oil companies play in the complicated task of getting fuel to the consumer — a function it said they would no longer play in an anonymous auction system. The ad, signed by Mobil’s president, William P. Tavoulareas, called Dr. Adelman naïve for thinking that OPEC members would participate in their own destruction.

Also in response to Dr. Adelman’s secret-bidding idea, some senators and representatives suggested that the United States set up a single purchasing agency to negotiate directly with OPEC. Dr. Adelman dismissed this idea as “absurd” because it would not necessarily diminish OPEC’s power.

The United States policy of not jeopardizing the world’s large oil suppliers — particularly Saudi Arabia, the largest — worked against Dr. Adelman’s idea. “Nobody has the stomach for any resistance,” he told The Christian Science Monitor in 1983.

Dr. Adelman contributed to a debate that has raged almost since Edwin Drake discovered oil in Pennsylvania in 1859. Geologists and others have long insisted that oil is running out, but economists have countered that oil will continue to be found as long as extraction technology advances and the price is sufficient.

Dr. Adelman used the Kern River field in the San Joaquin Valley of California to prove the economists’ point. In 1942, he said, the United States Geological Survey estimated that the field had 54 million barrels of reserves. In 1986, the agency raised its estimate to 970 million barrels, based on what could be recovered by modern technology. (The oil had been there all along but had been unrecoverable at prevailing prices and technology.) Between 1942 and 1986, the field produced 736 million barrels as increasingly better technology made it possible to squeeze more oil from the ground.

His point was that reserve estimates are based on current technology and prices, not just underlying geology. The original geologists were not incompetent, he said, rather, the technology to extract oil vastly improved.

“When will the world’s supply of oil be exhausted?” Dr. Adelman asked. “The basic answer is never.” His point has been proved many times in oil industry history, most recently by widespread use of new drilling techniques that include hydraulic fracturing and horizontal drilling to force more oil from the earth. The federal government estimated that domestic crude oil production this year will average 9.24 million barrels a day, the highest since 1972. As a result of increasing production, oil imports last year fell to 36 percent of United States’ consumption from 60 percent in 2006.

This increased production — and the knowledge gained from it — pushed estimates of domestic crude reserves recoverable at current prices and technology to more than 33.4 billion barrels for the first time since 1976. The increase in natural gas reserves has been even greater: They rose to 2.3 trillion cubic feet in 2013 from 1.3 trillion cubic feet in 2000.

Morris Albert Adelman was born in New York City on May 31, 1917, and graduated from the City College of New York in 1938 with the intention of becoming a science teacher. He served as a Navy ensign in the Pacific during World War II, commanding a landing ship. After the war, he earned a Ph.D. in economics from Harvard.

His early research was on industrial organization. In 1959, he examined the A.&P. supermarket chain and concluded that it had achieved lower prices because of its size, not because of anticompetitive pricing.

In 1962, he published an influential article on petroleum costs and a book on natural gas supplies, “The Supply and Price of Natural Gas.” His other books included “The World Petroleum Market” (1972) and “The Genie Out of the Bottle: World Oil Since 1970” (1995).

He is survived by a daughter, Barbara Adelman. Dr. Adelman’s wife, the former Millicent Linsen, and his son, Larry, died before him.

In the 1970s, when many Americans were angered by what they saw as OPEC’s greed, Dr. Adelman viewed the organization purely in business terms. “Those fellows are not considerate and they’re not malicious,” he said. “They’re just trying to do the best for themselves, squeezing the goose without killing it.”

NY Times