Apache Corp. has announced a major oil-and-gas discovery in an area of Texas that geologists previously dismissed as not likely to have recoverable hydrocarbons. That’s good news for energy consumers, including electric generators, although not particularly welcome for energy producers, where it could contribute to continuing soft prices.
The Wall Street Journal reported that the area in West Texas near the Davis mountains “had been overlooked by geologists and engineers, who believed it would be a poor fit for hydraulic fracturing. It could be worth $8 billion by conservative estimates, or even 10 times more, according to the company.”
For me, the story is also about the continuing failure of followers of the 18th Century British cleric and philosopher Thomas Robert Malthus, who posited in his 1798 book “An Essay on the Principle of Population” that global population was increasing geometrically and food production only arithmetically. The result, according to Malthus? The world was doomed to famine, collapse, and the end of civilization as we know it.
He was wrong in spades. Malthus failed because he failed to understand the disruptive role of technology.
But that has not deterred others, to this day, from continuing to spout the false Malthusian dystopianism. In 1968, Stanford butterfly biologist Paul Ehrlich and his wife Anne published the best-selling “The Population Bomb,” arguing the same discredited case as Malthus. He still makes his population bomb argument. (An aside: I spent two weeks with Paul and Anne in 2004 in a small group visiting New Zealand’s South Island and subantarctic islands. Lovely people.)
One of Ehrlich’s key allies then and now was physicist John Holdren, President Obama’s science advisor and perhaps the worst choice for a major advisory position in the administration. Holdren was a partner in Ehrlich’s legendary bet with the late University of Maryland economist Julian Simon. As NPR described it two years ago, Ehrlich argued that minerals would become more scarce and expensive as they were used up. Simon argued that technology and brain power would replace the diminishing mineral supply many times over. They made a wager in 1980 on the prices for copper, chromium, nickel, tin and tungsten over a decade.
Ehrlich, with Holdren backing the bet, said prices would soar. Simon said they would fall. In 1990, Simon won, with the prices for the five metals declining by about 50%.
The same sort of false scarcity analysis happened in the energy economy, dating to the 1950s and acclaimed oil and gas geologist M. King Hubbert. In a 1956 paper delivered at the annual meeting of the American Petroleum Institute, he predicted that U.S. oil production would peak around 1965-1970, and decline thereafter. Hubbert’s incorrect prediction guided U.S. energy policy for the next 50 years (and is still prominent in Holdren’s rhetoric on energy supply).
Hubbert was the inspiration of a group of 1970s and 1980s energy policy gurus, who then formed the basis of the “peak oil” enthusiasts of subsequent years. Among them was my good friend and fusion energy expert Bob Hirsch and his former colleague and first U.S. energy secretary the late Jim Schlesinger. As recently as 2007, both were on speaking tours touting the decline of oil and gas production. That was just before the fracking and shale gas and oil revolution hit the U.S.
Again, like Malthus, the peak oil catastrophists failed to reckon with the game-changing role of technology. In this case it was directional drilling and hydraulic fracturing, which turned the 1970s “oil crisis” that shaped Schlesinger’s and Hirsch’s views, into irrelevance in the 21st Century.
Apache’s fossil find is further evidence that Malthusian analysis is inherently flawed. It is also good news for consumers around the world. The Journal reported, “The company has begun drilling in the area and says the early wells, which produce more natural gas than oil, are capable of providing at least a 30% profit margin at today’s prices, including all costs associated with drilling.
“Some are so prolific that they can break even at a price of 10 cents per million British thermal units, according to the company.”