“Resources are highly dynamic functional concepts; they are not, they become, they evolve out of the triune interaction of nature, man, and culture.”[1] So said the institutional economist Erich Zimmermann, explaining why so-called fixed, depletable resources expand rather than deplete in free market settings. Julian Simon similarly stated: “Human beings create more than they destroy.”[2]

I have been thinking of Zimmermann and Simon when reading energy press reports about new oil and gas discoveries and energy-poor areas suddenly becoming energy rich.

One story concerned the doubled reserve estimate of shale gas made by the U.S. Energy Information Administration. As reported in the New York Times:

Just last month, the Energy Department more than doubled estimates of recoverable shale reserves to 827 trillion cubic feet, the energy equivalent of roughly 140 billion barrels of oil. That’s slightly greater than the proven oil reserves of Iran, the world’s third largest repository of crude.

On the oil side, the Bakken Formation has made North Dakota the new oil power of the U.S., with some 11 billion of proved reserves. Move over California, Alaska, and Louisiana. Watch out Texas. The Houston Chronicle noted:

The Bakken doesn’t yet rank with Spindletop in the annals of oil lore, but it has yielded its share of tall tales. Over the past few years, the precise size of the reserves in the formation has been the subject of intense speculation and debate. A mythology about the Bakken has even sprung up: Some have conjured that the total reserve may be several times greater than that of Saudi Arabia, home of the world’s largest reserves. Well, not quite – at least not yet. But the speculation hasn’t kept the conspiracy theorists from wondering why information about the true Bakken reserves has been withheld.

Internationally, Israel is now swimming in natural gas. The Houston Chronicle editorialized:

One of the frequent tongue-in-cheek laments over the years by Israelis since the founding of the Jewish state is that when God gave his people a promised land, he placed it in one of the few areas of the Middle East bereft of oil and gas treasures.

That appears to have changed thanks to the discovery by Houston-based Noble Energy and several Israeli partner firms of the newly christened Leviathan field in the Mediterranean Sea. The field contains an estimated 16 trillion cubic feet of natural gas with a market value of tens of billions of dollars.

Given the existence of another field located in Israeli waters by Noble in 2009, the potential is there for Israel to develop international muscle as an energy exporter…. Even though the exploitation of the new reserves will take years, they have stirred dreams in Israel of a biblical bonanza. A former Israeli lawmaker, Rabbi Michael Melchior, told the Los Angeles Times, “Moses not only brought us the land of milk and honey, but also the land of gas, and perhaps oil too.”

Back in the 1970s, James Schlesinger, the first secretary of the Department of Energy, warned about “a classic Malthusian case of exponential growth against a finite source.” Peak oil? Peak gas. How wrong he was a third of a century ago; how wrong are the peakists today.

[1] Zimmermann (1951), quoted in Robert Bradley, Capitalism at Work: Business, Government, and Energy (2009), pp. 209–210.

[2] Julian Simon, The Ultimate Resource 2 (1996), p. 580.

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