How fast will the oil run out?

There is considerable optimism today about U.S. energy production. More oil wells are being drilled, and domestic oil production is skyrocketing. But we know oil is a limited resource. Won’t the production from new wells eventually run dry? Host Mary Walden asks her husband, NC State Economist Dr. Mike Walden.

Mike Walden – “New wells do run dry, and this is something we have to keep in mind as we are very excited now — many of us are — about the expansion of oil production in the country. Oil production is way up, compared to where it was 10 years ago. We’re still below our peak production in the 1970s. And of course a lot of this new production is based on the fact that drilling techniques had advanced. Horizontal drilling is now something that can be done. But on average, what you see from a newly drilled oil well is it rapidly declines in production within a year of its drilling, and the well virtually runs out of production within four years. So, in order to maintain your production over time you’re going to have to get constantly increasing numbers of new wells drilled. And we also see that the rate at which new wells are drilled is very closely tied to the price of oil.  If the price of oil goes up, it makes it more economically sensible for a company to expend the resources to drill that well, knowing that it’s going to run out in four years as the price of oil goes down. Obviously the opposite happens. So, there’s some key economics and some physiological elements here that we have to keep in mind when we do look at the potential for our future oil production.”