A few Cafe patrons have, quite reasonably, questioned my claim that it is not at all obvious that we’re running out of oil . The main point common to all of the e-mails that I’ve received on this matter is that, even though proved reserves of oil are today higher than they were in decades past, the actual, physical amount of oil in the ground must be less than it was back then. After all, the more oil we use the less oil there must be remaining in the ground.
This fact is almost surely true. But economically it might be irrelevant. I reprise below one of my earliest posts  here at Cafe Hayek:
Is it Possible that the Quantity of Oil is Practically Infinite?
It seems obvious that we’re destined to encounter seriously reduced supplies (and higher prices) of oil. Even physics professors say so .
But consider a couple of scenarios.
Scenario One: You’re a hungry mosquito on the surface of an enormous balloon. The balloon contains as much blood as an Olympic-size swimming pool contains water. You, hungry mosquito that you are, inject your snoot into the balloon and enjoy a meal. Of course, by doing so you negligibly reduce the volume of blood in the balloon. But whether you know it or not, you can gorge yourself on blood from this balloon for the rest of your life and there will still be far more blood remaining in the balloon at your death than you’ve consumed during your lifetime.
Scenario Two: You’re a hungry mosquito on a balloon the size of child’s marble. You take a meal. The size of your meal relative to the blood-contents of the tiny balloon is large; you significantly reduce the contents.
I don’t know if humanity and its demand for oil is like the mosquito in scenario one, but I’m sure that we are not like the mosquito in scenario two. We might be in some intermediate scenario – say, like a mosquito sitting atop a blood-filled balloon the size of a large beach ball.
But we could be like the mosquito in scenario one. That mosquito needn’t know – probably wouldn’t know – that she’s atop a physical quantity of blood that is practically limitless. If she’s told, accurately, that the amount of blood in her balloon is finite, she might worry that she’ll run out of blood, or that she’ll drink so much that what eventually remains in the balloon will be too costly for her to suck out; she might persuade herself to drink less blood. Would she be wise to do so?
If scenario #1 is closer to reality — and the evidence so far is consistent with that possibility — then the relevant constraint on our getting oil out of the ground is not any scarcity of the physical amount of oil that exists in the ground as much as it is the scarcity of our ingenuity and resources for use in that endeavor. As this ingenuity and these resources become more abundant — as their effectiveness in finding and extracting crude oil improves — the amount of oil available for our use does indeed increase, in a very real way, over time even as we consume more oil.