Energy Innovation and the Unknowable Future

By at 8 February, 2023, 10:18 am

by Raymond J. Keating –

The history of energy production is laden with predictions about resource decline and exhaustion, and each one has turned out to be dead wrong. There are a host of reasons for these wrongheaded predictions, but most tend to tie back to the failure to consider innovation.

New and improved ways of discovering and tapping into oil and natural gas resources have transformed energy production, particularly in the United States. Advancements in hydraulic fracturing and horizontal drilling, for example, rank high among the innovations leading to the U.S. becoming the leading producer of oil and natural gas.

Just consider how estimates of proved reserves of crude oil and natural gas have changed. As noted by the U.S. Energy information Administration (EIA), “Proved reserves are operator estimates of the volumes of oil and natural gas that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under existing economic and operating conditions.”

A key phrase here is “existing … operating conditions.” And “existing operating conditions” includes “existing technology.” But entrepreneurship, invention, private investment and innovation in a free enterprise system mean that predicting the future of industries and our economy, beyond a short-term view, amounts to a fool’s errand. Technologies advance thanks to entrepreneurs, businesses and investors driving such innovation.

Just consider the following two charts from the EIA on its most recent measures of proved reserves of crude oil and natural gas.

And consider global proved reserves of crude oil in the following chart of

In the end, it’s misguided government policies – tax, regulatory and protectionist trade measures, for example, that increase costs, restrict market access, and enhance risks and uncertainties – that serve as the most troubling restraints on bountiful energy production.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.


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