Review - Oil Panic and Global Crisis

Steven Gorelick's relatively recent book Oil Panic and Global Crisis is a definite must-read if you have an abiding interest in energy investing and the fate of major energy companies like BP (NYSE: BP), ExxonMobil (NYSE: XOM), or Chevron (NYSE: CVX).The author is a Stanford professor and a Guggenheim Fellow, and I suspect those qualifications come in handy as this book may strike quite a few people as controversial.

One of the most interesting take-aways from the book is that the notions of "peak oil" may be irrelevant if not fatuous. While the peak oil crowd holds to the idea that Hubbert successfully predicted the peak of oil production in the U.S., this book demonstrates how that is not really the whole story. Namely, the peak might have been successfully predicted, but the forecast bell curve has been disproven as production in the U.S. has not fallen off nearly so much as previously predicted.

Gorelick also talks a lot about the role of technology in oil and gas extraction. Oil and gas that was considered technologically or economically off-limits only a decade or so ago is now routinely extracted (thing about the shale gas plays, horizontal drilling, and fraccing). As geologists get better tools for finding oil and producers get better tools for extracting it, a lot more oil and gas is going to be available than we currently might expect.

On top of that, Gorelick devotes time to two other interesting concepts. First, we should keep in mind that the energy intensity of growth and economic activity is declining and may continue to do so as newer, less energy-intensive options come into the market. If, for instance, more and more automobiles have enhanced fuel efficiency (whether through more efficient engines or hybrid technologies), that will reduce the burden of ongoing vehicle growth.

Second, Gorelick mentions how relatively unexploited most of the world's oil and gas fields really are. The United States ranks #13 in global proven energy reserves ... but according to the Baker Hughes (NYSE: BHI) Rig Count, roughly 50% of the rigs operating in the world are operating in the U.S. Assuming that other countries will eventually drill as aggressively as we do, that raises the possibility of a much longer decline period for global oil and gas production.

All in all, this was a very interesting book, heavy on facts, details, and footnotes, that may make those worried about long-term energy supplies feel a little better. It is definitely a good read for those interested in global energy, energy investments, and the future of energy supplies over the next couple of decades.