by Raymond J. Keating-
In previous blog posts and articles, I’ve noted the following about energy but it warrants repeating. Over the past century, there are two things one can count on in terms of energy. First, doom-and-gloomers will regularly predict that “the end is near” regarding energy resources. Namely, they predict that humanity faces declining oil and natural gas resources, and in the not-too-distant future, we will simply run out of such resources. Second, energy entrepreneurs and innovators prove the doom-and-gloomers wrong time and again.
In the past, a key indicator often cited by the doom-and-gloomers was “proved reserves.” What are those? As defined by the U.S. Energy information Administration (EIA), “Proved reserves are those volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions.”
There are qualifiers that should be noted. They are “known reservoirs” and “existing economic and operating conditions.”
Innovation and technological advancements can and do change, and therefore, “known reservoirs” and “existing economic and operating conditions” can and do change. In fact, they can change quote dramatically, as noted in the two following charts (Source: EIA)
The most recent examples occurred in the early 21st century when technological advancements made in areas like hydraulic fracturing and horizontal drilling altered the energy equation in major ways. These innovations dramatically changed the estimates for proved reserves in terms of natural gas and crude oil. So, at the turn of the century, the view that the U.S. was on a permanent decline in terms of oil and natural gas production was near ubiquitous. And within a few short years, that all changed, and it continues to change, as further developments drive down costs.
Indeed, that’s what tends to happen in the marketplace when entrepreneurs, inventors, innovators and investors are free to explore, discover and experiment. The dramatic changes in the energy field experienced over the past 15 years or so are another example of how individuals operating in free and dynamic markets change life for the better, and by doing so, tend to make fools of the doom-and-gloomers.