MOST people read the story of the boy who cried wolf as a tale about overactive doomsayers. It's also a cautionary tale about apathy. Neither should be forgotten. We've seen the wolf-at-the-door evaporate half a dozen times in the century-plus of the Oil Age. Wags even say that the world has had just 30 years' petroleum supply left for the past 60 years. The tendency, therefore, is to think that crisis will always bring price increase, which will always bring more production - even glut like the present surplus of so-called ``anxiety crude.''
I've been musing on the subject because of an article and a speech on ``the next oil crisis'' which hit my desk at the same time, making opposite points.
Michael Lynch, a research associate in the International Energy Studies Program at MIT, has written a moderately optimistic article in MIT's ``Technology Review'' magazine. He argues that diversity of oil sources, sharp consumption reductions in Europe, Japan, and North America brought about by conservation, and the buffer allowed by the US Strategic Petroleum Reserve make a political interruption of petroleum supplies like the 1973 and 1979 oil crises less likely in future.
He does allow that the trading system in the world may create increasingly volatile price swings. (Petroleum futures trading exaggerates the petrol market in somewhat the same way that options and futures affect global stock markets. Professionals in each market may argue that these non-real instruments are useful for sensible hedging. But they also allow speculation to get out of hand.)
James Critchfield, a savvy Middle East hand and president of Gulf Futures Inc., has just delivered a speech to an international energy conference in Paris in which he takes a longer term - and more pessimistic - view. Basically he argues the following:
Current known world oil reserves of 700 billion barrels amount to about 30 times annual world oil production. United States oil reserves, however, are less than nine times US annual production. Probably some 500 billion barrels of new proved reserves will be added to the world reservoir in the next 40 years. But the distribution pattern around the globe indicates a shift of leverage in the next two generations. If nothing is done to change present trends, the global oil market will be in grave trouble a generation from now - about 2015.
Exports from Africa and Latin America will peak by about the year 2000, Mr. Critchfield says, and both continents will cease to be exporters before 2025. The Mideast will then be the only major exporter of oil. Import dependencies of North America, Western Europe, and Japan/Far East will range from 92 to 98 percent. By 2015, Critchfield's straight-line economic model shows, demand will exceed production capacity.
Critchfield suggests shifts that would make the picture far less grim. Among other things, he proposes an ``Expanded Oil Scenario'' that strongly emphasizes increased conservation and use of ``enhanced oil recovery techniques.'' He believes that some 500 billion barrels of heavy and extra-heavy oils can be pumped, plus some 440 billion barrels of bitumens extracted from the earth. Those figures would be added to the 700 billion in today's proved reserves of lighter crudes and perhaps 500 billion in additional reserves expected to be discovered during the next 40 years.
Do the Lynch and Critchfield scenarios really conflict? If so, which is right?
Lynch appears to be more optimistic because he looks at a shorter time frame. He compares today and the immediate future to the two ``oil shocks'' of the 1970s and sees progress. For instance, US gross national product has grown by 15 percent since the second oil shock in 1979 but oil consumption has fallen by 14 percent - and oil imports by 35 percent.
Lynch worries that conservation measures already taken leave less cushion from future conservation steps. He also worries such things as management of the Strategic Petroleum Reserve and idling of marginal wells. But he feels market forces will still prevail.
But Critchfield worries that politicians and corporate decisionmakers will look only a few years ahead at any time and not begin to take the long-term steps he urges in time to do so efficiently.
Oversimplified, Lynch's scenario says that world markets can adjust to problems of supply and demand if they have a few assists from government: a moderate oil import tariff, deregulation of natural gas and electricity markets, abolition of the windfall-profits tax on oil, and loan and technical assistance to non-OPEC oil producing nations. He may be right in the short run of a presidential or prime ministerial term or two. But that's only the blink of an eye. Western economic summits and corporate planners ought to look seriously at what Critchfield proposes.
Earl W. Foell is editor in chief of The Christian Science Monitor.