We've been lied to for decades.
“We've got about 35 years worth of oil left in the whole world.”
“A major energy crisis.”
For as long as we've been consuming oil, we've been running out.
“In ten years,
if we do nothing,
we will be importing more than half our oil
at prices fixed by others.”
The common narrative is that the US
needs to become independent from foreign sources
or risk...
“...an economic, social and political crisis
that will threaten our free institutions.”
“To free ourselves from imported oil.”
But today, after decades of warnings about America
running out of crude
and being warned about imported oil,
on the surface,
nothing appears to have changed.
Today, the United States Oil and Gas industry is in its golden age.
They overtook Russia in 2011
and became the world’s top producer of natural gas.
They overtook Saudi Arabia in 2018
and became the world’s top producer of petroleum.
And by 2022,
they produced roughly the same amount of oil
as they consumed,
so you’d think that they finally freed themselves
of imported oil.
But yet,
40% of the oil they consumed was imported
and 8% came from Russia.
We've now entered a new global energy crisis,
and consumers are noticing this at the pump.
Historically, whenever this happens,
it starts a new cycle of dire warnings in the media.
So let's take a step back
and look at the origins of the oil industry in the United States,
and how this creates a recurring narrative of doom and gloom.
This is the big lie about the US oil industry...
with Hindsight.
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Today, the global oil and gas industry
is the largest industry in the world by revenue.
It brings us more than twice as much revenue
as the global tourism sector.
And it's twice the size as global car manufacturing.
It's a truly massive industry,
and it started in the United States.
In Western Pennsylvania, in the 1850s.
It was relatively common to find sites
where petroleum was seeping from the ground.
Edwin Drake
had been drilling for years
when Seneca Oil Company decided to withdraw his funding.
Drake took a personal line of credits,
and just before his final funds ran out, he got lucky.
On this picture, we see Drake with the nation's first refinery.
A year later,
Pennsylvania was the richest oil producing region on Earth.
And by 1880,
the United States was responsible
for 85% of the world's crude oil production.
But Drake died a poor man.
He never patented his drilling methods,
and he had not purchased much land.
The oil boom grew out of his
control and was ultimately tamed by the Rockefellers,
who now owned 90% of U.S. oil refineries and pipelines.
And they had the world's largest fleet of oil tankers
around that time.
The attention shifted to other regions, and especially to Texas.
By that time, Texas was still principally driven by agriculture.
The mechanization of farm work was in full swing,
enabling farmers to produce more food with fewer people.
The state had invested in railroads,
which drastically affected Texans lives,
but nothing could prepare them for what would happen next.
At Spindletop nearby Beaumont,
a well named Lucas Number One started
gushing oil more than 100ft into the air.
It took nine days to cap,
and this discovery fueled a major oil rush in the region.
A year later,
the Spindletop oil field was producing 17.5 million barrels in just one year
out of the year's total oil production of 18 million.
The discovery led to an influx of hundreds of wildcatters
lusting after a piece of the action,
as well as thousands of workers looking for jobs.
This was followed by the emergence of related industries
like supply and manufacturing firms, dealers and refineries,
as well as scam artists, gamblers and liquor dealers.
All looking to get a chunk of the workers paychecks.
This was the beginning of the modern industrial era of Texas.
In 1908,
Henry Ford introduced his model T,
the world's
first inexpensive mass produced car,
which led to an increased demand for petroleum.
And in 1911,
Standard Oil had gotten so large
that it was broken into smaller, separate entities.
The Spindletop discovery
became the birthplace of other oil giants like Texaco and Gulf Oil.
And these industries had a ripple effect across the state.
The railroads, converted from coal to oil,
and roads were paved to facilitate the use of cars.
People moved to the city
and the oil money was invested in education,
arts, and scientific research.
It affected every aspect of the lives of Texans.
But this was really just a start.
If we lay U.S.
oil production on a chart of this red line being Texas,
we see that it went down in the 1900s
before eventually going up and absolutely exploding
since the 1920s.
In 1950, Texas first produced a billion barrels of oil in one year.
But here's the thing.
Right before oil production got into high gear,
the people were made to believe something else.
The U.S.
Geological Survey in 1919
predicted that oil supplies would run out within a decade.
There had been widespread shortages of oil in the years prior,
giving credibility to these claims.
This prediction triggered the country's first nationwide oil security fears,
and the recommendations were clear.
First, petroleum had to be preserved.
Second and third,
more research is required
and the greatest waste of petroleum
has been in exporting crude petroleum
and petroleum products to foreign countries.
In just a few decades
since the emergence of the global oil industry.
The United States had become addicted
and narratives that oil production was less than
oil consumption became widely repeated.
Warnings of oil shortages
and seeing the United States as a dependent nation
instill fear in the American public.
There were a total of seven oil shortages before 1950,
and each time there were plenty of individuals
ready to prove that crude oil
would be exhausted within a few years.
But it never did.
Here's a quote I found from 1958.
We usually find oil in new places with old ideas.
Sometimes also,
we find oil in old places with a new idea,
but we seldom find oil in an old place with an old idea.
Several times in the past,
we felt that we were running out of oil, whereas
we were only running out of ideas.
In 1950, the US Geological Survey
estimated that the world's oil endowment was 600 billion barrels.
This figure gradually increased to an estimated 3000
billion barrels by the year 2000.
After five decades of consumption.
They estimate that there is no more oil left than in 1950.
The oil industry has become global,
and the debate about U.S. energy
has shifted focus over the decades.
Shaped by geopolitics,
technological advances and concerns over climate change.
“I indicated that the sudden cutoff of oil
from the Middle East
had turned into a major energy crisis”
After the 1973 oil crisis
it increasingly centered around strategic risks.
This crisis showed how external price hikes
could affect the US economy.
It also forced several administrations
to keep relationships with some of the least democratic,
but very oil rich nations.
In recent years,
the United States has increased its oil production,
especially in Texas.
Even though there are fewer active rigs.
Better technology has resulted in a much higher production.
There's no question that at some point the oil will run out,
but this is unlikely to happen within our lifetimes
or even our children's lifetimes.
U.S. oil production has seldom been so high,
and it's finally caught up to match consumption.
But yet, in 2020,
the United States was still importing
about 40% of their oil,
and this was increasingly imported from Russia.
At the time that Russia invaded Ukraine,
the United States
imported a record number of 672,000 barrels of petroleum per day
before banning oil imports.
But today,
of the 8 million barrels that are still being imported,
a little over half comes from Canada
and much of the rest comes from the Persian Gulf
and from OPEC countries.
Why wouldn't they just use the oil that they produce?
The problem is that the United States lacks the capacity
to refine all the crude oil that it produces
into fuels such as gasoline and diesel.
It has primarily the capacity to produce light sweet oil.
But most refineries in the U.S.
are designed to process heavy sour oil.
It boils down to simple economics.
Overseas oil, even after shipping costs, is often cheaper
than domestically produced oil.
Many companies,
as a result, import the types of oils
for which they have the existing refining infrastructures.
Now, to answer the question why we're constantly being told
that oil is running out, we must enter the realm of speculation.
One theory
is that periodic energy crises are used by politicians
to criticize their incumbent.
It's leveraged to achieve political ambitions in the energy sector.
But there are also real concerns about whether we can produce
enough oil to satisfy the global demand.
And some earlier claims were perhaps
rooted in insufficient research.
The amount of crude oil we produce
is thus more dependent on the political will to allow extraction,
our own inventiveness,
and our technical ingenuity,
rather than the limitations imposed on us by mother nature,
at least for now.
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