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3/7/2006 12:45:36 AM

Updated 02/24/06

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All’s Well With Oil
BusinessWeek explains why there’s no need to worry about oil supplies.

by  Amy Menefee
July 6, 2005

     Rising prices for crude oil have revived questions about the end of the world’s oil supply. But the July 11, 2005, issue of BusinessWeek went deeper into the debate and came out with answers.

     Christopher Palmeri and Peter Coy reported on oil companies’ strategies for the future, including squeezing more oil out of existing fields as well as developing new ones. New technologies are enabling companies to identify the earth’s resources. And higher oil prices help make innovation and expansion possible, especially for smaller companies.

     While heavier oil costs more to extract from the earth, Palmeri reported that “optimists say … higher prices have now made it increasingly profitable to drill for such unconventional sources.”

     At the center of Palmeri’s article is a study by Cambridge Energy Research Associates (CERA), an energy consulting firm that predicts 20 or more major new oil fields will start producing each year through 2010. As new fields provide more barrels and new technologies help companies get more out of existing fields, CERA predicts production capacity will outpace world consumption by an increasing margin.

     Some of those new technologies include supercomputers that map subterranean deposits of oil and gas. Another option is injecting carbon dioxide into the earth to increase underground pressure, which makes extracting oil easier. As Otis Port wrote in BusinessWeek, this method kills another environmental bird – carbon dioxide emissions. Oil company Anadarko is using carbon dioxide emissions from an Exxon natural gas processing plant in Wyoming to rejuvenate some of its oil wells. This practice will permanently dispose of “2 million tons a year of greenhouse gas” by 2008, Port said.

     BusinessWeek’s coverage departed from much of the mainstream media’s take on the oil industry and world supply. News outlets frequently quote supporters of “peak oil” theory, who believe that the world’s oil production will soon peak and then decline. The Associated Press reported on June 5, 2005, “And then it really will be all downhill. The price of oil will increase drastically. Major oil-consuming countries will experience crippling inflation, unemployment and economic instability.” The AP article continued, “The only way to increase production capacity is to discover more oil. Yet with a few exceptions, there just isn’t much left out there to be discovered.”

     BusinessWeek’s Palmeri, Coy and Port proved that such statements are inaccurate. There are many more resources available, and companies are using their profits to tap into them.


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