Oil had been seeping to the surface of the ground in an area of northwestern Pennsylvania since the Seneca Iroquois occupied the region. They used if for medicinal purpose, which the white settlers did also as they gradually displaced the original occupants.
Among them was Samuel Kier whose oil supply exceeded demand so he began looking for alternate uses to medicinal applications. He sent samples of the stuff to Professor James Booth who was a chemist at the Franklin Institute in Philadelphia, a primitive research organization named after Benjamin Franklin, the colonial era scientist and inventor. Booth cooked the samples in a still and discovered its by-product was suitable for lighting. He provided this information to Kier, who in a short time was able to create a still and a lamp to burn this early form of kerosene.
The product came to the attention of a New York lawyer in the 1850s who arranged financial backing to commercialize the venture, since the competitive artificial light sources of the time were whale oil and candles. Edwin Drake was hired to drill a well – a curious choice since his entire work experience was in railroading. But Drake was all too attracted to the annual salary of $1,000 and the opportunity to be the general manager of whatever outcome the venture produced. By sheer dumb luck, he walked the fields surrounding the village – by then called Titusville – and picked among the puddles of oil in the fields the only spot where oil would be found at a shallow depth.
Since water continued to fill the hole as Drake and his helpers drilled, they came up with another fortuitous idea – using a white oak log to drive a cast iron pipe casing into the hole which prevented the aquifer from filling the drill hole. On Saturday, August 27, 1859 work had stopped at 69 feet and everyone expected they would have to drill another hundred or so feet to find oil. The next morning, the casing was filled with oil. The news spread quickly and opportunists moved in to lease nearby properties and start drilling operations. The oil was pumped out using the same hand-operated device that was employed to pump water from wells. The gooey substance was then poured into barrels and carted off to distilleries by teamsters.
About 4,500 barrels of oil were recovered from that field in 1859, and by 1862, in the middle of the Civil War, production had reached three million barrels. The petroleum industry was born. Fortunes were made by almost everyone in oil – except Drake who had neither patented his techniques nor controlled production by buying or leasing the surrounding land. Imposing business management and controls on the nascent industry would come from John D. Rockefeller in the 1870s with the formation of his Standard Oil Company. Drake would die in poverty.
Since 1859, America has been on the verge of depleting its supply of fossil fuels several times, if you believe federal government predictions.
The Bureau of Mines said in 1914 that our oil reserves would be gone by 1924. They weren’t, so in 1939 the Interior Department said oil reserves would be depleted by 1952. They weren’t, even though we had fought World War II, so in 1951 the Interior Department tried again and said we would run out of oil in 13 years – in 1964. Wrong again. Then in 1970 the world’s “proven” oil reserves were estimated to be 612 billion barrels. Unfortunately, 767 billion barrels of consumption later, there was still an estimated 1.2 trillion barrels in the ground. The Middle East oil embargo struck as did the pathetic picture of Jimmy Carter in 1977 forecasting in a televised speech that we would use up all of the world’s oil reserves by the end of the 1980s. But by 2006 almost 700 billion barrels had been pumped and proven reserves were then estimated at 1.2 trillion barrels.
When an apocalyptic preacher predicts a date for the end of the world, he’s called a kook. When a political flake predicts a date for the end of oil, he’s called an environmental conservationist. Both hate to see the world march on past their doom dates.
The reason that “proven” reserves become unproven by the evidence of consumption is that the technology for finding reserves is constantly improving – so there is more there than thought when less sophisticated tools were used in the past. Additionally, the technology for retrieving fossil fuels is constantly improving so some reserves were not counted in the past because the cost of getting it out of the ground exceeded its value in the market. With better retrieval techniques, we can go back and recover fuels the old tools could not, and we can count them in the reserve inventory. Therefore, in 1980 the US had an estimated 30 billion barrels of reserves. Thirty years later, we had consumed almost 80 billion barrels and still had more in the ground than the original estimate.
Despite record rates of consumption, with the advent of industrialism around the world, especially in China and India, world oil reserves are 15 times greater than they were in 1948 when records began to be kept. World coal reserves have increased 75% in the last 20 years and world gas reserves have increased 400% in the last 30 years. At the present levels of consumption, the world has 45 years of known retrievable oil in the ground, 63 years of gas, and 230 years of coal.
Proven or known reserves are “proven” because their volume has been verified by sophisticated sampling, often in anticipation of recovery – i.e. wells are being drilled or soon will be drilled. Potential reserves are “potential” because they are not scheduled for immediate recovery, therefore less sophisticated sampling has been done to map their exact volume but the amount of reserves is generally well known. The potential world reserves of oil at present consumption rates will supply the next 114 years, whereas gas will supply 200 years, and coal, 1,884 years.
Possible reserves are called “possible” because the likelihood of finding fossil fuel in their underlying geology is high but few drill cores have been sunk because recovery is far back in the production queue.
This distinction in “proven” versus “potential” versus “possible” is important to understand because one of the statistics Obama likes to trot out is that America has 2% of the world’s reserves but consumes 20% of the world’s consumption, ergo domestic drilling is a fool’s errand. Not true, and since he’s the smartest president to hold the office, he probably knows that or ought to know that.
Here’s vanilla vintage Obama in campaign-speak at the University of Miami last month:
So what does this mean for America? It means that anyone who tells you we can drill our way out of this problem doesn’t know what they’re talking about — or isn’t telling you the truth. The United States consumes more than a fifth of the world’s oil. But we only have 2% of the world’s oil reserves. That means we can’t just rely on fossil fuels from the last century.
Isn’t telling the truth? Let’s talk about truth in oil. There are 400 billion barrels of crude in US reserves that could be recovered today using existing drilling technologies, according to the US Department of Energy – for those living in Palm Beach county Florida, that Department is part of the Obama administration. A Rand Corporation study found that the Green River Formation in Wyoming, Utah, and Colorado hold about 800 billion barrels of oil shale in "technically recoverable" reserves, which means these reserves are recoverable with existing technology. Green River holds more than triple the known reserves of Saudi Arabia. When you add the two, the US has 1.2 trillion barrels of technically recoverable oil, according to the Institute for Energy Research. But there’s more. The possible US reserves are estimated at 2.3 trillion barrels. The truth is the US is awash in oil as this figure clearly shows.
Obama’s “2% of the world’s oil reserves” refers only to 22 billion barrels of proven reserves which are essentially in production now. It ignores potential and possible reserves. That’s like saying I only have $5.25 in money, meaning that’s what’s in my pocket. But that ignores the hundreds of dollars I might have in bank accounts and the thousands in untapped potential credit. Now who’s telling the truth?
The US, Canada, and Mexico – presumably friendly neighbors – possess oil reserves that exceed all of the oil that has been consumed in the world since the first well in Titusville was drilled over 150 years ago. Saudi Arabia has about 260 billion barrels of reserves. Stated differently, at present consumption levels, North America has 250 years of oil reserves. It has 175 years of natural gas reserves, more than Russia, Iran, Qatar, Saudi Arabia, and Turkmenistan – combined. And coal? North America has enough coal to generate electricity for 500 years – more than Russia, China, Australia, India, and Ukraine combined.
So what’s the flap about the US being so energy-dependent on oil imports from countries, most of which don’t like us? It’s called radical environmentalism – the ideology that pits humans versus the planet and believes in the long run that the planet would be better off without humans or at least without their messy ways.
Perhaps you’ve seen the Nissan LEAF television commercial which show short clips of people doing everyday things – brushing their teeth, using their coffeemaker and microwave, using their cell phone, turning on their computers – except all of the devices are gasoline-powered and belch out smoke and soot when they are turned on. Then a background voice asks what if everything ran on gas. The camera quickly cuts to a green leafy street and we see a man walking up to his car. He pulls the charging plug out of an efficient tony vehicle revealing that what appeared to be a parking meter was in fact a charging outlet. The commercial ends with the contra question, “… then again, what if everything didn’t [run on gas]?
Innovation for the planet, the commercial claims – a great car for a green planet. You can see the commercial here.
Notice the subliminal imagery of the belching smog and its equally subliminal connection to human health. The beautiful lie, however, is that electricity must be generated. We can’t dig it out of the ground or snatch it out of the air. And 86% of our electric power is generated by facilities whose motive power is oil or coal. The equally beautiful lie is that we live in an “either-or” world. We can have this or that but not both. The world of radical environmentalist has no “ands” in it – no this and that. It’s inconceivable to them, for example, that we could drill in the Arctic Wildlife Reserve and recovery the oil reserves there without disturbing the environment or the wild life there.
Despite all of the environmental roadblocks that were thrown in the way of achieving energy independence – whose chief patron is currently in the White House – this country managed to achieve a milestone last year. We were a net exporter of petroleum products. How? Two ways.
First, most of the production occurred on private land rather than federal land, euphemistically called “public” lands. Second, the widespread use of hydraulic fracturing, or fracking, has made recovery more productive in terms of cost and yield. Fracking has been used for 60 years, but it is getting increasingly sophisticated in allowing energy companies to drill horizontally and recover gas and oil from up to a mile from the well. It involves pumping millions of gallons of water and sand to break open rocks, tapping energy-rich shale formations that were irrecoverable or overlooked in the days of conventional drilling. Using the fracking methodology in over one million wells, the energy industry has recovered seven billion barrels of oil and 600 trillion cubic feet of natural gas with no harm to the environment.
The other reason for achieving last year’s milestone is that the Obama administration has no control over private and state lands where there are substantial oil and gas deposits. A side-by-side comparison of oil and gas production on private versus federal land shows that since Obama took office, oil production has decreased on federal property while it has increased on private and state property. The increase in the latter offset the decrease in the former. Fracking helped make private and state land production more effective and that helped the country become a net exporter of petro-products last year.
States like North Dakota and Pennsylvania contain large deposits of oil-rich shale which also included locked-in gas reservoirs. These are known as the Marcellus and Bakken deposits. North Dakota will produce 16 million barrels of oil this year thanks to the pro-energy policies of its government. The Heritage Foundation reported that drilling in North Dakota is growing at a record pace, making North Dakota “the poster child for what can happen when we unleash free enterprise and allow states to develop and commercialize their resources.” North Dakota unemployment is 3.4% – the lowest in the country.
Because of its energy economy, North Dakota hiring and wages are causing a mass migration to the state by people in search of jobs. There a person can make $15 an hour serving tacos, $25 an hour waiting tables and $80,000 a year driving a truck. Under the surface of North Dakota lies the Bakken formation, estimated to have reserves of between 4 billion and 24 billion barrels of oil. So unless energy prices collapse, the state’s economy will remain strong for years.
Watford City is located near the center of the Bakken formation. Normally there are 3,000 permanent residents. Now there are 6,500. Most are looking for oil field jobs which pay an average of $70,000 and with overtime, up to $100,000. Jobs in the local economy are having to pay more just to hold on to their staff. For example, entry level jobs in grocery stores, convenience stores and banks are paying $12 an hour. Housing is booming, as is the public infrastructure needed to support the population boom, paying those who do this kind of work wages they haven’t seen in years.
The economies of Alaska, South Dakota, Nebraska, and Texas are not far behind. Their common denominator with North Dakota is energy production.
This boom is not likely to be reproduced on federal property where about 70% of our country’s known oil shale exists. The federal land deposits contain five times the amount of oil in the Saudi reserves. In a free market, these reserves would be the first recovered because of their high quality. But the Obama administration has closed most of the land to drilling on the ludicrous assertion that shale oil has not been proven technically and commercially viable. Say that with a straight face.
Assuming open access to federal lands were possible, all of the federal regulations applied to oil and gas development simply make it more expensive than producing on state or private land. Yet Obama’s chief of the Bureau of Land Management, in recent testimony before Congress, stated that it is considering making recovery on federal land even more expensive. Onshore production royalty rates are to be increased 50% -- a curious move when Obama recently “promised” the American people that he “would do everything in my power” to bring gasoline prices down.
The proof of the pudding is in the eating so let’s sample a little Obama pudding – next week.
Stay tuned.
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