Having just completed a college course on the subject I feel that I should debunk some of the more prominent myths about the oil industry. Let’s take a step back from the biased media and politicians and apply some logic.

Myth 1: We will run out of oil soon

This is partially true. As with any resource, there is a limited quantity. However, it is unlikely that we will ever entirely run out of oil, only economically profitable oil. Canada has the second most proven reserves out of any country. Unfortunately it is stored in “unconventional sources,” such as tar sands and oil shale, which are VERY expensive to refine. The only certainty for the future is higher prices.

The amount of untapped oil is not exactly known for several reasons. First of all, wells are hard to find and once proven to contain oil, we can’t be sure of how much is left. Geologists use seismic readings and their knowledge to divide the amount of oil into proven and unproven reserves, meaning what we know we have and what we think we have. Both of these numbers are often government secrets in Middle Eastern countries (remember that oil is nationalized in Middle East). Given the vast quantities of oil in the region, this adds a large grey area to the number of years of petroleum left.

When discussing the world’s supply, peak oil is almost always mentioned. Developed by M. King Hubbert in the 1950s, the theory essentially states that at oil production is shaped like a bell curve and will eventually reach the top, a point called peak oil. Once peak oil is reached no matter how hard the wells are pumped oil cannot be produced any faster and production will eventually decline. Hubbert became famous when his prediction for US peak oil became true in 1970. Keep in mind that the US produced all of its own oil throughout most of the 20th century and still continues to produce most of it. Now many scientists are looking to predict global peak oil production. Predictions range from sometime in the next two decades all the way until the next century.

Myth 2: Oil companies are entirely responsible for high gas prices

Oil companies seem to be the biggest scapegoat for high prices. The image given to oil companies by politicians and the media could easily lead one to assume that Exxon and Shell have caused gas prices to double in the last decade. Keep in mind that oil is very expensive to produce and supply is going down. The obvious oil wells (those located relatively close to the surface and containing large amounts of oil) have already been discovered. What remains are wells buried deeper with somewhat less oil. Research and exploration for new wells is very expensive and the chances of hitting a well are often a mere 1 in 6. You can certainly disagree with this, but lower gas prices are less of an incentive and provide fewer funds for companies to go out and find new reserves. And don’t blame gas stations/convenience stores for gas prices. Often they make less than $100 dollars a day from selling gas. One person driving off without paying can eat their entire gas profit for the day. Drive-offs cost the industry of $250 million a year.

Myth 3: OPEC is entirely responsible for high gas prices

For those who don’t know, OPEC is the Organization of Petroleum Exporting Countries. They claim that their mission is to “coordinate and unify the petroleum policies of Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital to those investing in the petroleum industry.” It is made of five founding members (Iraq, Iran, Saudi Arabia, Kuwait, and Venezuela) and 9 other countries: Indonesia, Ecuador, UAE, Nigeria, Libya, Algeria, Angola, Qatar, and Ecuador. It is estimated that these countries control 50% of the world’s proven reserves. Many consider OPEC to be a cartel that artificially drives up prices, but their effectiveness in controlling prices is disputed. At the moment demand is extremely high and whatever is being produced is being used. Some countries have disobeyed the production quotas which limit the amount of oil that countries can export. Obviously the basic laws of supply and demand apply and lower supply leads to high prices.

OPEC is certainly not America’s friend, but they are not as big a threat as you may think. America is the number one consumer of oil, using 21 million of the approximately 80 million barrels produced a day. Many countries will have plenty of unsold oil if they cut us off. Under difference circumstances in the oil industry OPEC can be very effective. In the early 1970s they boycotted US and it caused an energy crises.