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Home / Carpe Diem / From peak oil to energy abundance. Energy expert now says the Permian Basin is a permanent, near-infinite resource – Publications – AEI

From peak oil to energy abundance. Energy expert now says the Permian Basin is a permanent, near-infinite resource – Publications – AEI

Summary:
AEI From peak oil to energy abundance. Energy expert now says the Permian Basin is a permanent, near-infinite resource From David Blackmon’s Forbes article “Gilmer: We Should View The Permian Basin As A Permanent Resource” (emphasis mine): Allen Gilmer, Co-Founder and Executive Chairman at DrillingInfo is not a man who minces words, an attribute that has served him well during a long career in the oil and gas industry.  When it comes to the Permian Basin in West Texas and the amount of oil and gas resource contained in it, he becomes positively loquacious. “We should view the Permian Basin as a permanent resource,” he says, “The Permian is best viewed as a near infinite resource – we will never produce the last drop of economic oil from the Basin.” No one disputes that the resource in

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From peak oil to energy abundance. Energy expert now says the Permian Basin is a permanent, near-infinite resource

From peak oil to energy abundance. Energy expert now says the Permian Basin is a permanent, near-infinite resource - Publications – AEI
From peak oil to energy abundance. Energy expert now says the Permian Basin is a permanent, near-infinite resource - Publications – AEI

From David Blackmon’s Forbes article “Gilmer: We Should View The Permian Basin As A Permanent Resource” (emphasis mine):

Allen Gilmer, Co-Founder and Executive Chairman at DrillingInfo is not a man who minces words, an attribute that has served him well during a long career in the oil and gas industry.  When it comes to the Permian Basin in West Texas and the amount of oil and gas resource contained in it, he becomes positively loquacious. “We should view the Permian Basin as a permanent resource,” he says, “The Permian is best viewed as a near infinite resource – we will never produce the last drop of economic oil from the Basin.”

No one disputes that the resource in the Permian is huge, but ‘infinite’ is a big word.  I asked him to expand on that concept. “That is the practical reality with the amount of resource that is in the ground,” he says, “The research we’ve done indicates that we have at least half a trillion barrels in the Permian at reasonable economics, and it could be as high as 2 trillion barrels.  That is, as a practical matter, an infinite amount of resource, and it is something that has huge geopolitical consequence for the United States, in a very good way.  It has a huge consequence in terms of GDP, and right now it is creating an American energy global ascendancy.”

MP: What an amazing turnaround in just the last decade in how we view energy abundance/energy scarcity in America! About ten years ago, before the Shale Revolution, the general consensus was that we were entering an era of increased energy scarcity because of “peak oil” — the “hypothetical point in time when global production of oil reaches its maximum rate, after which oil production will gradually decline.” See a Google Trends time-series chart here (and below the post) of the search interest in the term “peak oil” — it peaked in 2005 (and again in May 2008 at a slightly lower level) before declining in the post-Shale Revolution era to almost nothing in recent years.

And now we have an oil expert and geophysicist talking about America’s most prolific oil field — the Permian Basin — as a “permanent, near infinite resource” that will never run out! Peak what?

The charts above show graphically the amazing productivity of the Permian Basin. According to EIA estimates, the Permian Basin is now producing more than 2.5 million barrels of oil per day (see top chart), which is an annual rate of nearly 1 billion barrels of oil. If Gilmer’s estimate is correct that the Permian Basin holds an additional half a trillion barrels of recoverable oil, that would be a 500-year supply of oil at the current production level, and at 2 trillion barrels, a 2,000 year supply! And if that’s an accurate forecast of Permian Basin reserves, Gilmer’s description of the Permian Basin as a “permanent, near infinite resource” makes perfect sense because the probability is pretty close to zero that we’ll be using fossil fuels even 100 years from now, much less 500 years or 2,000 years in the future.

The bottom chart above shows the increasing importance of the Permian Basin’s oil output to the total US supply. In 2010 only about 1 in 6 barrels of domestic oil (16.5%) came from the Permian Basin in West Texas and now more than 1 in 4 barrels (27% in July) of US oil production is from the Permian Basin.

Bottom Line: We’ve come a long way in ten years, from an era of “energy scarcity” and growing concern about “peak oil” as recently as 2008, to a new era of “energy abundance” and a Texas energy expert describing the Permian Basin as an inexhaustible, permanent, and near infinite resource. The game-changing importance of the amazing, revolutionary, “Made-in-the-USA” technologies that sparked America’s Shale Revolution, and especially the contribution of the creative genius of the US petropreneurs who were behind those innovative breakthroughs, really cannot be overstated. Carpe Oleum. 

From peak oil to energy abundance. Energy expert now says the Permian Basin is a permanent, near-infinite resource - Publications – AEI

From peak oil to energy abundance. Energy expert now says the Permian Basin is a permanent, near-infinite resource
Mark Perry

Mark Perry

Mark J. Perry is concurrently a scholar at AEI and a professor of economics and finance at the University of Michigan’s Flint campus. He is best known as the creator and editor of the popular economics blog Carpe Diem. At AEI, Perry writes about economic and financial issues for American.com and the AEIdeas blog.

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