Energy fables: when fantasy confronts reality.

• Author: Wolf, Jr., Charles
• Position: China National Offshore Oil Company - Union Oil of California

Like the Harry Potter series, tales about energy security abound in myths. The difference is that in Harry's case the myths are taken for granted; in energy security, they are not.

While the energy mythology has been circulating for decades, it has been revitalized in recent months by a series of disparate and distracting events. These include: inflated oil prices (although the current $63 per barrel price is about the same in real terms as that reached in 1982); China's and India's booming demand for oil making them respectively the second and fourth largest importers (the United States imports twice as much as China, and Japan is the third largest importer); the recently withdrawn offer by the China National Offshore Oil Company (CNOOC) to buy UNOCAL (a withdrawal due in part to indications conveyed ill recent energy legislation that the transaction would be a "threat" to U.S. energy security); and continued turmoil in the Middle East including the disappointingly slow revival of Iraq's oil exports.

One of the abiding myths about energy is that, because the earth's oil reserves are finite, these reserves will be exhausted at some point in the future. Moreover, by matching currently rising rates of consumption--especially the accelerating rates in China and India--with estimates of proven reserves, an approximate date can be estimated by which reserves will be exhausted. According to a former U.S. Secretary of Energy, the predicted date would be early in the twenty-first century.

This would be a compelling story if it were true, but in fact it is a canard. If and when the growth of oil consumption seriously depletes reserves, the cost of extracting oil (whether from shale, tar sands, or through tertiary recovery from buried crude deposits) will have assuredly risen to such a high level that non-fossil energy sources--nuclear, geothermal, hydro, wind, or biomass will be used in preference to oil and other fossil fuels remaining in the ground. The last few billion barrels of oil will remain in the ground because extracting them would cost more than they'd be worth.

A second fable in the energy mythology is that U.S. energy "independence" is both vital and attainable. The reality is that America's "dependence" on foreign sources of supply is ineluctable, a fact of life that can be mitigated, hedged, and cushioned, but not avoided. Even if the United States were to secure all its energy sources from oil and natural gas within North...