Oil Futures

Some experts believe the age of oil is near its end. Others insist that there are trillions of untapped barrels left — and that the future of oil depends more on what happens above ground than below.

According to ”The Prize,” Daniel Yergin’s Pulitzer Prize-winning 1991 history of the oil industry, the dawning of the automotive age was a time of deep pessimism about America’s oil supply. World War I had just ended and few new fields had been discovered. Crude was in such short supply that some refineries were running at half capacity. ”Leading geologists,” wrote Yergin, ”prophesied gloomily that the limits on US production were near.”

Instead, the fear of shortage and the resulting rise of oil prices spurred the use of experimental prospecting techniques. The use of seismographs, aerial photography, improved drilling technology, and specialized inventions like the torsion balance and the magnetometer ushered in a new era of oil exploration, and the 1920s saw a rush of major American oil finds.

Yergin, the founder and chairman of Cambridge Energy Research Associates, a leading oil consultancy based in Cambridge, likes to tell this story to people who are worried that we have entered the final, terminal phase of exhausting the world’s oil supply that we have passed the point of what experts call ”peak oil.”

A lot of people are worrying these days. In public appearances the famed former Texas oilman T. Boone Pickens has declared that supplies are dwindling. Arjun Murti, a Goldman Sachs oil analyst who spooked markets last spring by predicting that oil could in 2007 rise to $105 a barrel, recently said that forecast might be conservative if the peak oil model is correct. Even President Bush, another former oilman, has been hinting that the age of oil is drawing to a close, following up last month’s State of the Union speech in which he proclaimed that ”America is addicted to oil” with a barnstorming tour to talk up the benefits of wind and solar energy, ethanol, and a host of other alternative fuels.

Boston Globe