Petroleum For Our Future Progress

Abstract

Abstract Since oil and gas supply two-thirds of the energy consumed in the United States, the availability of petroleum is a matter of vital concern for our economic progress and national security. A review of this subject is timely because of some recent predictions that the domestic industry cannot long sustain substantially increased production and that the United States will soon begin to run out of oil. Fortunately, domestic crude oil production could be sustained at a rate more than 2,000,000 B/D above that of Oct., 1956, for a period of three years or more even with a substantial reduction in drilling. Drilling at current or higher levels will mean continuation of the past upward trend in domestic petroleum availability for the foreseeable future. Recent estimates that the United States will only produce 150 to 200 billion bbl of oil will prove conservative because of improved producing techniques and additional discoveries in old and new provinces. The Dept. of Interior considers 300 billion bbl as the ultimate reserves of the United States to be a reasonable figure, and even that may seem conservative in another 20 years. As more oil is discovered, the estimate of ultimate production in the United States will continue to be pushed upward and the predicted date of running out of oil will be pushed further into the future. The amount of oil to be found and produced in the United States will be affected by national policies on imports and on taxation of domestic production. A reasonable volume of imports will serve as all effective stimulus to efficiency in domestic operations but an undue volume of imports will have a damaging effect on our progress and security. Reasonable tax provisions on petroleum production are also essential to provide increasing quantities of oil for the future. The provisions applicable to petroleum production illustrate differential treatment that does not constitute a preferential tax advantage because it is related to the unusual risks in the search for oil. The existing rate of depletion comes close to measuring the capital value of oil in the ground while a lower rate would fall far short of recognizing the capital value that should be protected from taxation as ordinary income. National policies should be designed to encourage development of domestic resources in order that we may have sufficient petroleum for our future progress.