The Five-Minute Guide: Oil

Esquire

By Robert Thompson
October 2005

IT CAN BE FASHIONED into a Chewbacca action figure or the fuel that propels a stealth B-2 Spirit. One sixth of the world's economy is devoted to exploiting it. Boiled by refineries into a phalanx of hydrocarbon products — gasoline, diesel, kerosene, you-burn-it-they'll-make-it — crude oil has set us free. We've employed it to unlock the atom, explore outer space, map the human genome. It's the most potent, important resource ever gifted to mankind. And it's pretty much gone.

7 Critical Questions

1. What's "peak oil"?

Formulated by Shell Oil geophysicist M. King Hubbert, "peak oil" is the recognition that oil and gas are finite resources subject to depletion. All oil production will peak according to a bell curve, with increasingly negative repercussions after the peak, when supply plummets and demand increases. Hubbert, who died in 1989, was mostly ignored in 1956 when he predicted continental U.S. oil production would crest between 1965 and 1970. But when domestic production peaked in 1970, experts applied his suddenly portentous theory to world supplies. Various Hubbertites now predict that global oil production will peak within twenty years.

2. But we have reserves. Right?

Created in the 1970s and housed in massive underground salt caverns along the Texas and Louisiana coasts, America's Strategic Petroleum Reserves' 727 million barrels would keep the U. S. operating at normal capacity for about forty-five days, figured at the current U.S. consumption rate of sixteen million barrels a day.

3. Can we get our oil from someplace outside the Middle East?

Venezuela, Mexico, Russia, and various African nations will provide temporary relief, but their reserves will likely be played out by 2025. As a further worry, discovery of major new oil fields hit zero for the first time ever in 2003.

4. Whatever happened to ANWR?

Depending on which side of the debate over drilling in Alaska's Arctic National Wildlife Refuge numbers come from, estimates of reserves there range from mammoth to moderate. But a 2004 study by the Department of Energy concluded ANWR resources would only slightly reduce dependence on foreign oil. The mean estimate of ANWR's reserves, 10.4 billion barrels, is the amount the U.S. burns through in about twenty-two months. "It's the addict wanting to sell the family jewels for another fix," says Bart Anderson, coeditor of the online Energy Bulletin. "The problem is addiction."

5. Should we be scared?

Yes. And it's not just Rapture nuts who say so. When asked about the coming energy shortage in 2003, Matt Simmons, Bush advisor and CEO of the energy investment bank Simmons & Company International, replied, "I don't think there is [a solution]. The solution is to pray." Even the oil-glutted Saudis have a saying: "My father rode a camel. I drive a car. My son rides in a jet. His son will ride a camel."

6. When do we start waiting in line for gas?

If peak oil is valid, your car will soon be the least of your worries. (Collapse of the dollar, unemployment, and your ineptitude with hand tools might be of greater concern.) Nevertheless, with the "peak" comes a supply-and-demand crisis.

7. Can't we just make oil?

Synthetic oil is made from coal and other products through a process known as gasification. Already, South Africa liquefies coal to produce much of its diesel fuel. But the process is expensive and, according to one estimate, replacing conventional oil with synthetic oil at current rates of consumption would bring about the peak of U.S. coal supplies within two decades.

The History

WAY BACK: Although it would take eons for the energy-dense residue of fossil deposits to be fully appreciated, the ancients were well aware of the magical properties of the strange goo oozing from primeval seeps. Early mystics around the Tigris and Euphrates rivers foretold the future from shapes oil made when cast upon the water. Greek navies used it to make potent incendiary bombs.

1859 The world's first oil well is tapped near Titusville, Pennsylvania, and crude soon replaces whale oil as the illuminant of choice, setting off a fortune-hunting spree across the world.

1870 John D. Rockefeller establishes the Standard Oil Company. Rock's monopoly control and ruthless tactics establish an enduring business model for "Big Oil."

1876 First practical gas-powered engine is built by Nikolaus Otto.

1914 to 1918 World War I is decided in large part by the use of oil-fueled machines.

1941 Pearl Harbor may have precipitated U.S. entry into World War II in American eyes, but a U. S. embargo on oil to Japan makes it imminent.

1944 Near war's end, Roosevelt and Churchill partition Middle Eastern reserves: Persia for Britain, Iraq and Kuwait to be shared, and Saudi Arabia to the U.S.

1960 OPEC (the Organization of the Petroleum Exporting Countries) is formed by Middle Eastern nationals to protect their prized resource.

1973 Decreased Western ability to control its own oil supply is exposed during the Yom Kippur War, when OPEC nations punish American support of Israel by embargoing oil shipments to the United States, igniting an oil crisis.

1980 The OPEC embargo, along with the Soviet invasion of Afghanistan, leads to the Carter Doctrine, making it official U.S. policy to employ "any means necessary" to protect the flow of oil from the Middle East.

1991 to Right Now The first significant test of the Carter Doctrine comes with the Gulf war, when U.S. troops force Iraqi invaders out of Kuwait. The Western coalition prevails, but the war sets an ominous tone for the future, as increasingly influential peak-oil theorists begin forecasting the "end of oil," an event perhaps heralded by today's rising gas prices and battle for Iraq.

The Alternatives

"The stone age did not end for a lack of stones." Industry advocates often invoke this famed quote from former Saudi oil minister Sheik Zaki Yamani to soothe troubled investors. The message: Don't worry, we've always come up with new technologies, and we will again. But scientists are skeptical that a fuel substitute packing anything close to oil's punch will be developed. Wind, coal, Canadian tar sands, nuclear, biodiesel, ethanol, synthetic oil, hydrogen, fusion, thermal depolymerization, vast solar arrays in space — after decades of research, every "magic bullet" has failed to deliver due to either fiscal, environmental, or technological problems. Exacerbating the issue is the fact that alternate sources can't be developed independent of fossil fuels.

The "basket" approach — a combination of alternate energy sources — seems the only way out of our oil-deprived wilderness, but even that requires a multibillion-dollar infrastructure overhaul and hordes of oil-burning machines to do the work. Despite relatively meager success stories (hydrogen-fuel-cell cars, solar and wind power), America's coming energy calamity will likely be solved only by a vast government program.

Today, for example, U.S. researchers studying solar power get by on about $50 million to $75 million annually. Meanwhile, oil and gas R&D scientists play with more than $2 billion a year. That ratio will simply have to be reversed by law in a centralized effort employing universities whose research departments have not (as have the University of Texas at Austin, Stanford, and others) already accepted irresistible corporate oil grants that have turned significant parts of them into giant laboratories for petroleum companies. Until that happens, the miracle breakthroughs we're hoping for will likely remain just that.

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