Peter Huber and Mark Mills
They were all wrong: the Malthusians, who immediately predicted the end of plenty. And the free-market types, too, who replied — only a shade less dolefully — that sharply rising prices would be the key to getting oil supplies back into balance with demand.
Twenty-five years have passed since that dreary day, Oct. 19, 1973, when King Faisal ordered a 25% reduction in Saudi Arabia's oil production and a ban on shipments to the U.S., launching the OPEC oil embargo. This year, however, the world's oilfields will produce 4 billion more barrels of oil than they did in 1973. And at record low prices (adjusted for inflation), even dipping below the pre-embargo level.
The price of oil doesn't determine the long-run supply of oil. It's true that political meddling certainly did jerk the price around — the cartel pushed prices up to a peak of $53 (in today's dollars) in 1981; then prices collapsed to a level at and even below the 1973 pre-embargo price of $13 (1998 dollars). Yet global annual output has risen by 21% in the quarter-century since 1973.
There is only one explanation. When oil keeps gushing ever more copiously while its price holds steady, you have to conclude that the geophysical well isn't anywhere near empty. Experts who speak confidently about "supplies of oil" are referring to "proved reserves," but those determine nothing.