NCPA - National Center for Policy Analysis

Both Oil Reserves And Demand Have Increased

October 17, 2000

Noted energy expert Daniel Yergin sees no evidence of an energy crisis at present and makes the point that what we are experiencing is really a price shock -- which he sees as probably temporary. Predictions of petroleum shortages have been intermittent for almost the entire history of the industry. But new reservoirs of crude have eventually been discovered to calm fears of shortages.

Yergin sees the possibility of supply disruptions over the short term. But if allowed to function without regulation, supply and demand will smooth over the rough spots -- just as they have in the past.

As for the longer term:

  • In 1970, proven world oil reserves were 560 billion barrels.
  • Today, they have almost doubled to over 1 trillion barrels, and output -- at 79 million barrels a day -- is more than 50 percent higher than in the early 1970s.
  • Based upon current circumstances, world oil refining capacity should increase by 4 million barrels a day by 2002 -- which would exceed demand growth.
  • And world supplies could be almost 30 percent higher in 2010 than today, Yergin predicts.

He concludes that whatever happens to oil over the next few potentially difficult months, the adjustment process is already in motion. Higher prices not only modify demand, they supply oil companies with the financial resources to develop new supplies.

Source: Daniel Yergin (Cambridge Energy Research Associates), "What Energy Crisis?" Wall Street Journal, October 17, 2000.

 

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