A Free-Market Energy Blog

Tribute to Tiber: “Oil is Found in the Minds of Men”

By Peter Foster -- September 9, 2009

[This piece, which originally appeared in the (Canadian) National Postcan be read in conjunction with MasterResource posts on “peak oil” here and here. A brief bio of Mr. Foster appears at the end of this post.]

The great petroleum geologist Wallace Pratt famously said that “Oil is found in the minds of men.” Discoveries depend on visionary theory, technical innovation and commitment to risky drilling. Plus luck. Peak Oil theory, by contrast -which asserts that global oil production has, or soon will, peak, and that this has powerful policy implications — is found in the limitations of the minds of men. It is less geological theory than unevolved intellectual shortcoming, although it certainly has its political uses.

The fruits of the “greatest resource,” as economist Julian Simon dubbed the human mind, appeared yet again this week with the announcement by BP that it had found a “giant” field at unprecedented depth in the Gulf of Mexico, an area that twenty years ago was regarded as played out. By contrast, the limitations and conceits that characterize Peak Oil were nicely summed up by a report on BP’s find in the leftist British newspaper, The Guardian.

According to that report, BP’s Tiber well, and another recent huge find in Iran, “have encouraged skeptics of theories which say that peak production has been reached, or soon will be, to hail a new golden age of exploration and supply.”

Note how the use of the term “skeptics” suggests that Peak Oil is the mainstream view, which it is not. The word also links unbelievers to beyond-the-pale climate change “skeptics.” Finally, the report suggests that these people are suggesting a “golden age of exploration and supply” although in fact the only relevant quote is from Peter Odell, professor emeritus of international energy studies at Erasmus University in Rotterdam, who merely says, “It’s an amazing turnaround from the gloom of the last 10 years. All these finds will take a long time to bring on stream, but it shows the industry is capable of finding more oil than it uses and shows we have not come to any peak.”

Peak Oil theory represents a combination of economic ignorance and moral rejection of markets as greed-driven and shortsighted. These all-too common attitudes usually go with a profound faith in effective government policy, despite the monumental weight of evidence to the contrary.

The seminal image for depletionists -as for apocalyptic climate change theorists — is that of the photo of the Earth taken from Apollo 17; seemingly dramatic confirmation of finite resources on a “small planet.” In fact, the interpretation of the Apollo picture is symptomatic of how far technology has outstripped our primitive assumptions about the way the world works. But then people don’t have to think about the vast, natural “extended order” of the economy any more than they have to worry about how their spleens work.

Debate between economists and Peak Oilsters tends to be a dialogue of the deaf. Economists often seem to imagine that they are explaining a technical issue. They note that the alleged failure to “replace” production is in fact due to the way reserves are reported. They stress that startling new technologies –such as the ability to drill in thousands of metres of water to depths of more than 10,000 metres (as at Tiber), or 3-D computer seismic imaging, or horizontal drilling –are constantly finding new oil and gas, and producing more from old reservoirs.

Again, citing how often alarms over “the end of oil” have been sounded since 1880 holds no sway with Peaksters. Since they see oil supply as essentially “fixed” and economists as deluded and morally deficient, delays in the projected “crunch” will only make it all the more painful when it –inevitably –comes.

Peak Oilsters do not so much refute economics and history as simply ignore them. They are victims of the “psychology of taboo,” which prevents them from assessing markets objectively.

For example, leading Peakster Matt Simmons has described the market as a “500-pound wrecking ball” and Adam Smith’s invisible hand as an instrument of strangulation!

Meanwhile it is not just The Guardian that has an unconscious depletionist slant. One tic that has crept into reporting new finds, or prospects, is to claim that they will “only” supply the world for so many days, or weeks, or months. Even The Wall Street Journal noted that Tiber, if it yielded a billion barrels of oil, would “only” supply the world for two weeks.

So does this mean that BP shouldn’t bother to proceed? Yet another way of playing on the limitations of human thinking is to note that “four new Saudi Arabias” will be needed to meet projected global demand in 2030, as if supply and demand were independent phenomena, or such a projection’s sheer inconceivability should reflect on the projection rather than on the limits of what most ordinary humans can conceive.

Yet another revealing Peak Oil trope is that the “easy” oil has been found, as if it was easier to drill in a remote, muddy areas of Pennsylvania with rigs brought in by donkeys 150 years ago than it is to drill from a high-tech drill ship (although it certainly is more expensive. A single Gulf well can cost US$200 million).

There are indeed major supply issues. Much of global supply is controlled by governments. Emerging economies, in particular China, have caused a surge in demand. Meanwhile the whole world is engaged in policy hysteria over climate change (which suggests that oil can’t run out soon enough). But a free market will provide all the incentive needed to entrepreneurs and innovators to promote energy innovation. More important, there simply is no alternative. The record of government-guided technology — outside war — is overwhelmingly disastrous, from Jimmy Carter’s Synfuels to the current wind, solar and ethanol boondoggles.

The oil industry, by contrast, is constantly producing new wonders. In a piece in the latest Foreign Policy magazine, oil historian and consultant Daniel Yergin notes that, “Again and again, in researching oil’s history, I was struck by how seemingly insurmountable barriers and obstacles were overcome by technological progress, often unanticipated.”

With regard to Peak Oil, Mr. Yergin points out that his own firm’s analysis of 800 of the world’s largest oil fields “indicates that the resource endowment of the planet is sufficient to keep up with demand for decades to come.”

Only governments can stand in the way. Supported by our misconceptions.

Peter Foster was born and educated in England. He studied economics at Cambridge and worked for the Financial Times of London before emigrating to Canada in 1976. He has written eight books including Self Serve: How Petro-Canada Pumped Canadians Dry, which won Canada’s National Business Book Award. His magazine journalism has won awards for topics as diverse as Moscow’s McDonald’s and oil exploration in the Beaufort Sea.

Since 1998, he has been writing a twice-weekly editorial column for the National Post. He is just finishing a book provisionally titled Why We Bite the Invisible Hand.


  1. Richard W. Fulmer  

    One reason that we always seem to have “only” 15-20 years of this or that resource left is that it is expensive to explore for additional reserves. It makes little sense to expend vast quantities of resources to look for oil and other minerals that will not be used for many decades.

    I suppose that pointing this out is useless. The time value of money is just another one of those “economics things” that peak oilers ignore.


  2. NEcros  

    This article has it all – bad logic, uninformed arguments, and blind faith that “free market” will somehow resolve all the problems by itself.

    It’s no coincidence that the advocates of Peak Oil theory recriut from geologists, physicists, and ex-oilmen. On the otherside, the deniers composted of economists and politicians. Who do you put your wager on?

    Basic high school physics tells us that if you have a system that requires energy input of more than 80 billions of barrels per year, and you draw all that energy from a sphere of a finite diameter, you gotta run out someday. The second law of thermodynamics tells us that the construction of perpetuum mobile is impossible.

    Yet these would-be economists try to convince us it has been already constructed. It all hangs on a thread of blind faith – because otherwise, we would have to admit to ourselves that we have already eaten through the future of our children.


  3. NEcros  

    “It’s an amazing turnaround from the gloom of the last 10 years. All these finds will take a long time to bring on stream, but it shows the industry is capable of finding more oil than it uses and shows we have not come to any peak.”

    This is an outright lie. Oil reserve finds peaked in 1960 and from that time, we are consuming MUCH MORE than we are finding. If you believe otherwise, provide solid data instead of some journalist fairy tales.


  4. rbradley  

    The history of minerals under market conditions is the history of increasing supply, not fixity/depletion. The history of government intervention in markets (outside of the ‘rule of capture’ in the U.S. decades ago) is the history of postponed production and artificial scarcity.

    On the theory of resource expansionism, see my essay http://www.politicalcapitalism.org/aboutrb/Resourceship.pdf.

    Resources are created by human ingenuity in a business/economic sense. The natural science concept of fixity is an intellectual dry hole for real-world applications, including public policy.


  5. Kev  

    Interesting response received to Mr Foster’s post, which nicely illustrates the social lightning rod that resource depletion and scarcity ( Peak-choose-your-resource ) has become.

    The subject of energy supply-demand balances is interesting and worthwhile, but hardly imaginable as a cultural battlefield – and yet is is.

    There are numerous websites and other resources devoted to Peak Oil and other stated depleting resources. Streams of bits-and-bytes are issued every day as to how Peakers can prepare themselves for a world of fossil fuel depletion or constraints. It has become a massive intellectual exercise as to describing an alternate future, and that discussion is hardly suppressed or hidden knowledge. Anyone with web access can research the subject. And those too poor not to have web access are probably not going to notice much of a change in their circumstances in an energy constrained world anyway. And those who have the capabilities – please, live your life as you see fit ! It’s just that society is not mandating your preferred solutions.

    But contradicting the dogma on Peak-whatever seems to attract a level of response that is intriguing to say the least. How much possible difference to the Doomers’ situation can it make if someone posts a contrary oped on a site like this ? There is a near-religious aspect emerging, and that will have consequences in and of itself.

    Rational discussion will suffer if nothing else.


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