Doug Casey: We Will Never Run Out of Oil

Doug Casey: We Will Never Run Out of Oil By  for Casey Research

Editor’s note: Today, we turn once again to our founder Doug Casey, who’s sharing his insights this week on everything from technology and commodities to politics and history.

Yesterday, Doug revealed why he views technology as a “liberating influence for the average man.” And in today’s Conversations with Casey, he tackles how technology has changed the energy sector over the past few decades – especially the oil industry.

Read on to find out what Doug sees ahead for the oil markets… and why he’s confident the world will never run out of oil…

Daily Dispatch: Doug, in the previous part of this interview, you spoke about the melding of science and technology with commodities. One of the biggest technology changes in the energy sector over the past 15 years or so was hydraulic fracturing, or fracking, in the energy sector.

That has led to the US becoming a net energy exporter. Is that sustainable, or will there be new technologies that will improve on that even further? Additionally, do you think it’s actually possible for us to exhaust all oil and natural gas in our lifetimes?

Doug Casey: First – and I know it will shock most people to hear this – but it’s relatively unimportant whether the US is an energy importer or exporter – pretty much in the same way it doesn’t matter if, say, Florida is an energy importer or exporter. But that takes us into another subject for another time.

Getting back to your questions, they’re important, and demand detailed answers.

There’s a huge controversy about fracking. That’s the process of drilling first vertically, often three, four or five thousand feet. Then when the bit hits an oil bed, it takes a horizontal turn and it might go for another mile or so. That area is flooded, mostly with water and sand, and small amounts of other chemicals to liberate the oil which is clinging to those rocks. It’s then pumped to the surface.

The good news for this technology is that it’s opened up lots of hydrocarbon deposits that weren’t feasible to recover previously. The bad news is that it’s fairly expensive to do all that drilling. Furthermore, these are not concentrated oil deposits. It’s a far cry from drilling into a lake of oil, and having it gush to the surface under its own pressure. Fracked deposits are high cost.

Daily Dispatch: Is it just about high costs?

Doug Casey: No, there are other problems with it. Not only are they high cost – generally speaking, we’re talking minimum $35 to $40 a barrel even for the best deposits – but they tend to have a fairly short life. In the oil business there’s a very important factor known as the decline curve. Wells typically produce most during their first year, then less the year after, and less the year after. Different types of deposits have different curves. Deposits in the Middle East tend to have very shallow decline curves, and can go on for decades.

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Doug Casey

For over a quarter of a century, legendary investor and best-selling author Doug Casey and his team at Casey Research have been helping self-directed investors to earn superior returns through innovative investment research designed to take advantage of market dislocations..