Soaring oil prices have revived the old bogeyman that the world is running out of oil. Economics is a great field for nostalgia buffs because the same old fallacies keep coming back, like golden oldies in music.

Back in 1960, a best-selling book titled "The Waste Makers" by Vance Packard showed that the known reserves of petroleum in the United States were only enough to last another 13 years at the current rate of usage. Yet, 13 years later, the United States had larger known reserves of petroleum than in 1960.

This has been a worldwide phenomenon. At the end of the 20th century, the known reserves of petroleum in the world were more than ten times what they were in the middle of the 20th century -- despite an ever-growing use of oil.

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No matter how many centuries' supply of oil there is on the planet, the high cost of oil exploration ensures that only the most minute fraction of that oil will be known at any given time. Thus there have long been recurring false predictions that we were running out of petroleum, as well as other natural resources.

The high cost of extracting and processing oil ensures that not even half of the oil in a known pool of oil will be brought to the surface and sent off to the refineries.

A generation ago, only about a quarter of the oil in a pool was likely to be brought to the surface. That is because the cost of extracting and processing oil from a given pool tends to increase as you drain from deeper into that pool.

Even at $60 a barrel, most of the oil that is known to exist is too costly to extract. How much will be extracted depends on how much higher the price of oil goes -- and how much new technology can recover more oil at lower costs.

What if the government did nothing about oil prices? Rising prices would lead people to reduce their use of oil and lead producers to drain some of the more costly oil out of the ground.
An oil 'crisis'?: part II
Once more there is no shortage of oil. There is only a shortage of profitable oil and even thats debatable. The enviormentalist are whats behind the high cost of oil. The left should be celebrating higher oil prices not bashing Bush for it.