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Craig Smith and I wrote “Black Gold Stranglehold: The Myth of Scarcity and the Politics of Oil” with the dual idea that we would not only further establish the abiotic, “Deep-Earth” theory of the origin of oil, but even more important, that we would set out the principles which would establish a new perspective on investing in energy industries.
Last week’s announcement by NASA that the Cassini-Huygens space probe had established that the methane on Titan is of abiotic origins was a threshold event. Dr. Hasso Niemann of the Goddard Space Flight Center left no room for doubt:
We have determined that Titan’s methane is not of biological origin, so it must be replenished by geological processes on Titan, perhaps venting from a supply in the interior that could have been trapped there as the moon formed.
In August 2004, a group of scientists, including Nobel prize winner Dr. Dudley R. Herschbach of Harvard University’s Department of Chemistry, published results of an experiment at Lawrence Livermore National Laboratories in which they synthesized methane inorganically in a diamond-anvil experiment, utilizing iron oxide, calcite and water in a Fisher-Tropsch reaction under temperatures and pressures designed to resemble relevant conditions in the Earth’s mantle. Again, the scientists left no doubt regarding their conclusions:
The study demonstrates the existence of abiogenic pathways for the formation of hydrocarbons in the Earth’s interior and suggests that the hydrocarbon budget of the bulk Earth may be larger than conventionally assumed.
Supporters of the biological theory of the origin of oil now have no basis for insisting that natural gas can only be produced from biological content, whether the biological debris specified is dead dinosaurs, ancient forests, or plankton resident in alluvial type sedimentary deposits on the continental shelf.
More of this debate will need to continue. The Lawrence Livermore experimenters commented as their last conclusion that: “Finally, the potential may exist for the high-pressure formation of heavier hydrocarbons by using mantle-generated methane as a precursor.” Clearly, the scientists saw the abiotic, deep-Earth origin of petroleum as a theory they now believe they can fully demonstrate under laboratory conditions.
What is occurring scientifically is strong validation for the abiotic theories advanced by Russian and Ukranian scientists since the end of World War II, a theory articulated in the United States by oil experts such as J.F. Kenney of the Houston-based Gas Resources Corporation and Cornell’s astronomer Thomas Gold who wrote the 1998 book titled, “The Deep Hot Biosphere: The Myth of Fossil Fuels.”
A key insight is the realization that the abiotic oil theorists have postulated that the biological oil theorists have mistaken abiotic oil for organically created oil. Simply because oil is found in sedimentary deposits does not mean that the oil is of organic nature, such is the force of the abiotic theory. Oil and natural gas created in the mantle of the Earth may well pick up biological debris as they pass through bedrock cracks to pool in the more porous sedimentary rock below the Earth’s surface. In other words, abiotic oil theorists argue that petro-geologists may have been finding abiotic oil and natural gas all along, even if they confused the oil and natural gas they were finding as being biological in origin.
In writing “Black Gold Stranglehold,” Craig Smith and I realized the debate at this point would have another dimension. The insights of the abiotic, “Deep-Earth” theory cast doubt on the “Peak-Production” theorists, such that the insights in “Black Gold Stranglehold” could advise energy industry investment theories from a different perspective. We began by noting that “peak-production” arguments as advanced by M. King Hubbert, Matt Simmons (author, “Twilight in the Desert”), and Kenneth Deffeyes (author, “Hubbert’s Peak: The Impending World Oil Shortage”) were a logical corollary of assuming that oil and natural gas were produced by some form of rotting biological debris.
Since “fossils” were by definition finite, so too “fossil fuels” must also be finite. The “running out of oil” argument was always nothing more than a tautology, a “slight of hand” restatement of the original premise reformed as a conclusion. That we will run out of oil someday cannot be proven today as an empirical certainty because we have not yet run out of oil and natural gas. To the contrary, the Energy Information Administration of the U.S. Department of Energy claims there are 1.28 trillion barrels of proven oil reserves worldwide, more than ever in human history, despite worldwide consumption of oil having virtually doubled since the 1970s.
This is why Craig Smith and I brought the theories of Dr. Julian Simon into the narrative of “Black Gold Stranglehold.” Julian Simon was a professor of business administration at the University of Maryland until his death in 1998. Simon had studied the history of energy resources as far back as the 1865, when the British became scared that they were running out of the coal that fueled the industrial revolution and provided the energy for the establishment of the British colonial empire. Simon argued that “peak-production” theories were Malthusian hoaxes that would inevitably occur whenever human beings began to utilize a natural resource extensively. The first “running out of oil” fear that Simon could document in the United States was traceable to 1885 when the U.S. Geological Survey announced that there was “little or no chance” to find oil in California.
Simon demonstrated that “peak-production” scares about natural resources always end up hoaxes. The empirical evidence never confirms the resource-exhaustion hypothesis. Instead, when cheap and readily available supplies of any natural resource are used heavily, the price goes up enough to stimulate technological advances and the exploration of energy alternatives, such that the original resource itself never actually exhausts. When did Julian Simon think we would run out of oil? His answer was “Never!”
It seems impossible to keep using energy and still never begin to run out – that is, never reach a point of increasing scarcity. But the long-run trends in energy prices, together with the explanatory theory of induced innovation, promise continually decreasing scarcity and cost – just the opposite of popular opinion.
A clear indication that important innovations are under way, following Julian Simon’s analysis, is when “peak-production” advocates win center stage such that their “running-out-of” hoax becomes commonly accepted conventional wisdom. At that point, oil and natural-gas prices will have risen to the point where viable industry innovations begin to emerge. We have never been at a point in the history of utilizing hydrocarbon fuels when entrepreneurial business activities were more interesting than they are now – not just in fuels that are alternatives to hydrocarbons, but even in the oil and natural gas industries themselves.
That is exactly the direction in which Craig and I are headed. We are resolved to write more extensively about oil and natural gas companies that are innovating and reaching a point of success where they are second or third-stage viable investment opportunities. “Black Gold Stranglehold” was never meant to be simply an argument about abiotic hydrocarbons. More importantly, the book was meant to make the abiotic theory available to a wider audience, exposing the “peak-production” hoax in the process.
Contrary to the advice of traditional-thinking oil-industry pundits, America’s use of hydrocarbon fuels today is not near the end of the story. Never has the world seen as dynamic and potentially profitable a world of energy resources opportunities as exists today. A great many of these investment opportunities promise our continued use of hydrocarbon fuels, an abundant resource we may never exhaust.