Over the past year, American drivers have found themselves longing for the days when two dollars per gallon seemed expensive. Oil prices are rising at an unprecedented rate, and as a result, many are questioning whether the Earth's available oil supply has reached its peak. Are there still oceans of oil awaiting our discovery? How much pain you'll be feeling at the pump in the future depends on the answer.
Senior Fellow, Hudson Institute
There are two questions--have we reached peak oil, and will we run out of oil?
I'm not willing to admit that we have done enough exploration to say that we have reached peak oil. We keep finding new fields and better ways to get oil out of the ground.
The view that we will run out of oil, or any other product, does not take into account the role of prices in guiding consumer choices and producer output.
The higher prices of oil have resulted in a cutback in Americans' demand for oil, with driving slowly but steadily declining. Exisiting stocks will take longer to be used up as Americans make different choices about size of cars, how much to drive, and how much energy to use in other aspects of their daily lives. If oil prices stay high, Americans will switch to substitutes. We won't run out of oil--we'll just change to less expensive forms of energy and new technologies.
As prices rise, producers are also finding that more use of past fields and more exploration is profitable. A potential new oil field has been discovered in the Arctic, with billions more barrels of oil. If Congress would allow more drilling offshore and in Alaska, we could find out more information about potential reserves.
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