New drilling method opens vast oil fields in US

by Pete Geddes
AP writer Jonathan Fahey (a 2010 PERC Media Fellow) reports on a new drilling technique that is opening vast fields of previously out-of-reach oil in the western United States (interactive graphic here).

I’m often asked about our consumption of natural resources, e.g., oil, iron, and copper. Since these resources are finite and population continues to grow, aren’t we in danger of running out? My short answer is no, we’ll never run out of anything that trades in the marketplace. But, we should be concerned about running out of “resources” that have no price and no owner, e.g., wild things and the ecosystems upon which they depend.

Geologists define resources as the total physical stock of any material, e.g., coal. In contrast, reserves are the portion of those resources that can be economically developed. Technological advances allow us to constantly move commodities from the resource category into the reserve pool.

Prices also expand our reserves, as yesterday’s high cost resources become today’s lower cost ones (e.g., Canada’s oil sands). Rising prices signal scarcity, and this creates incentives that spur conservation and the search for substitutes (e.g., silicon fiber-optic lines replaced copper phone wires to great environmental benefit).

When institutions foster innovation and property rights are secure, scarcity never wins against creativity.