How we create fossil fuel resources

Resources are things you can use. But despite the popular expression “natural resources,” nature gives us very little in the way of usable resources. It gives us raw materials but we need to use human ingenuity to transform those raw materials into resources.

Human beings are not resource depleters, we are resource creators.

That’s the issue I want to discuss here, focusing on energy resources.

We have more fossil fuel resources than ever before

The catastrophic depletion argument says we are depleting energy resources by using fossil fuels, which will be disastrous to us and to future generations because we have made ourselves dependent on these resources. In reality we have more resources now, including more fossil fuel resources, than people had 300 years ago, before we started producing fossil fuels.

Look at this chart.


The line on the bottom shows the world’s consumption of oil over time. Notice how the line slopes slightly up, which means every year on average we’re consuming a little bit more oil. Then the line on top represents our oil reserves.

Think about this for a second. We use more oil every year but we have more oil every year.

How we create fossil fuel resources

How is this possible? What’s going on is that fossil fuel resources are created, not taken. We’re taught to think of oil reserves as a fixed amount that nature gives us that we’re constantly using up. That’s not how it works. What happens instead is that people find progressively better ways to find, extract, refine, and use oil.

For example, in the 1800s people discovered something called “skunk oil.” It was unusable because it had a lot of sulfur in it and smelled like rotten eggs. Then people figured out how to refine it so this previously unusable product became oil. They used ingenuity to expand the supply of usable oil. The popular term “oil reserves” just refers to the amount that’s currently in inventory: basically, the amount it makes sense to develop given our current technology and economics.

As we evolve, as we figure out new ways to turn non-resources into resources, we can take more and more unusable hydrocarbon and make it usable. With any given fossil fuel there’s likely at least ten times more of it than we’ve used in the entire history of civilization.

That’s one reason we shouldn’t be worried about running out of fossil fuels. The other reason not to be concerned is that we have the unlimited ability to create other energy resources as well.


This doesn’t mean we can just ban some form of energy today without severe consequences. What it does mean is that over time we could potentially transform anything in the world into energy. Just the potential of nuclear technology alone shows that we don’t have to worry about running out of energy.

The key to abundant energy resources is to leave people free so that overtime they can continue to evolve new and better ways to get energy.

If people are free, then even if you would run out of fossil fuels in 200 years, you would gradually transition to something else. If fossil fuels became more scarce relative to demand, the price of fossil fuels would go up and then that would incentivize other people to compete.

I call this “evolving energy.” We’ll never run out of energy as long as we are always free to produce and use the most cost effective energy at any given time. The challenge we face isn’t using up a fixed amount of energy. There’s just an ongoing challenge of figuring out new ways to create the best form of energy under freedom.

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