About That Giant Texas Oil Find…Not So Much
Maybe you caught the breathless headline in Bloomberg: “A $900 Billion Oil Treasure Lies Beneath West Texas.” Or the one that USA Today carried: “Largest oil deposit ever found in U.S. discovered in Texas.” Turns out the excitement was an overly enthusiastic example of what Resilience.org excoriates as America’s new “fact-free” standard of news reporting. The real value of the find: minus US$500 billion.
Resilience looked more closely and critically at the U.S. Geological Survey media release on which numerous outlets had based their bullish reports. It determined that the agency had “estimate[d] 20 billion barrels of oil in Texas’ Wolfcamp shale formation,” adding that it was “the largest estimate of continuous oil that USGS has ever assessed in the United States.”
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But on closer examination, the site observes that “nothing new was ‘found;’ the Wolfcamp formation was well known and already being exploited. The USGS just made a new estimate; probably valid within the assumptions made; but it is just that: an estimate. It doesn’t mean that these resources have been discovered.”
But even if the discovery was genuine, it wasn’t as big as the headlines implied.
“Let’s assume that these 20 billion barrels are there for real,” writes correspondent Resilience Ugo Bardi. “How does this stack up in comparison with the world’s oil situation?” Given that global oil consumption now stands slightly above 33 billion barrels a year, the high-end estimate for Wolfcamp represents roughly eight months of world supply.
“In the end, all we can say is that, for this year, oil discoveries were just a little less, rather than much less, than what the world has consumed.”
As for Bloomberg’s thrilling anticipation of Texas’ buried “treasure,” the Wolfcamp deposit might be worth that only “if the oil magically leaped out of the ground without the cost of drilling and completing wells; if there were no operating costs to produce it; if there were no taxes and no royalties.” Citing energy analyst and blogger Art Berman, Resilience calculates that once all those costs are factored in, “this ‘bonanza’ of oil, at current prices, would result in a net loss of some $500 billion.”
“These would be the news,” Resilience adds drily, “if facts mattered.”