The Wall Street Journal has an article about a company called Continental Resources that found about 4 billion barrels of proven oil reserves in the mountains of North Dakota and Montana. That’s about a fifth of current proven oil reserves in the country, and is one of the reasons why America is now the 3rd oil producer in the world, behind Russia and Saudi Arabia. We produce about 5.5 million barrels of oil per day; Russia does 9.7 and Saudi Arabia, 8.9. However, the founder and CEO of Continental Resources, Harold Hamm (not related to Jon Hamm), thinks there are actually not just 4 billion barrels of oil in those mountains, but probably more like 24 billion. All this new oil is being found and extracted due to technological advances, without which the oil might as well not be there.

L.A. has a lot of well-camouflaged oil rigs like this one, right in the city
If the CEO is right, the 24 billion barrels in the mountains would more than double the country’s proven oil reserves, which are now at 19.1 billion barrels. In fact, if he’s right he thinks the country could achieve independence from foreign oil. Compared to the 1990s when we imported almost 70% of our oil, we now import under 50%. And about 40% of that comes from Canada and Mexico so our dependence on other, non-North American parts of the world is already pretty low — about a third. With a huge find in the country, that number could theoretically go down to zero.
But wait, what about alternative energy and global warming? The problem with alternative energy is that economics being what they are, people will always go for the cheapest thing. And right now, oil is by far the cheapest form of energy in most places. Natural gas is second. Solar power is really expensive: if you live in a sunny area and can get all of your power from solar panels on your roof, that installation will run about 30,000$; if your electric bill is the average 105$/mo, it’ll take almost 25 years to make up that installation cost, and by then you’ll need to replace your solar panels, on top of bearing the maintenance costs for 25 years. And that’s only if there’s no winter where you live. Wind is better, but it’s still more expensive than both natural gas and oil. A few years ago, when the price of oil skyrocketed for no reason, it really looked like alternative energy was going to be cheaper — but that’s not the case anymore. All alternative energy sources account for about 2.5% of American use.

There was a time when wind power was not alternative at all. Photo by Hisa Fujimoto
As for global warming, until it starts affecting the economics of oil production, people will only care about it in principle. Sure, everyone wants to theoretically be green, but will most people pay more for wind or solar power? Nope. And even if global warming starts affecting things like agriculture and rising sea levels, that won’t affect the price of oil, because they’re unrelated. It may make the price of wheat and land go up, but not the price of oil — not unless governments start taxing oil more to punish it for the global warming.
And global warming may not even cause the price of wheat and land to go up, because some of the largest landmasses in the world right now are frozen tundra, in Siberia and Canada. If the earth warms up a few degrees, those lands will probably become wheat fields and modestly priced real estate in temperate climates to which people will escape from the hellish heat in the Caribbean. Also, there’s still the problem that energy use from all sources — not just fossil fuels — causes global warming, just by virtue of creating heat during the conversion process.

2010 International Energy Agency prediction of future oil
But oil is a finite resource, and sooner or later it will start to run out, so alternative energy will become more cost effective as the price of oil goes up due to the diminishing supply, right? The related peak oil theory says at some point, discovery of oil will hit a maximum and will start declining after that, which will cause the price of oil to go up. The theory dates back to 1956, and accurately predicted the peak of US oil production in the 1960s. However, it predicted global oil production to peak in 1995, and it still hasn’t; that estimate keeps moving forward, and as of now it’s sometime in the 2020s. There are two reasons why global production hasn’t peaked:
- Oil consumption actually declined in the 1980s because of more fuel efficient cars that came about in the aftermath of the oil crisis in the 1970s
- It looks like conventional oil production actually did peak in 2006, but we now have technologies that get oil from unconventional sources, like the mountains in Montana and North Dakota
So we’ve been using less oil and finding more of it, which means we’re still nowhere close to running out of oil. How not close? At current production rates, we’re good for about 64 years. A handful of countries (Canada, Iraq, Iran, Kuwait, Venezuela, UAE) could produce oil at their current rates for well over 100 years. Compared to our 19 billion barrels of proven oil reserves (possibly 45 billion if the above-mentioned CEO is right), Saudi Arabia has 264 billion; Canada, 175; the lowest of the 100-year countries are Venezuela and UAE, with 97 billion; Russia has 74 billion; Libya, 47. But populations will increase, as will standards of living in Asia and Africa, which will cause them to consume even more oil. But then again… if recent history’s any indicator, technology will do a lot to mitigate that fact, by creating machines that use oil more efficiently and by finding more usable oil than we have now.

The bottom line is that unless something catastrophic happens, oil will still be the main energy source for most of this century, and maybe even longer. We may slowly be switching to electric cars, but when we plug them in to our homes, that electricity is likely to come from an oil-powered power plant.
From The Wall Street Journal