The oil industry is being completely upended.
Just the increase in America's oil output since 2008 is larger than the outputs of every OPEC nation except Saudi Arabia, according to oil analyst Daniel Yergin. OPEC's decision to not cut output last week has pushed oil prices to their lowest level in almost five years.
This is probably the biggest story in global economics right now.
The history of oil -- how we produce it and how we use it -- is fascinating. And no one has done a better job of telling oil's story than Yergin. His book The Quest is the best book I've read on the history of oil.
Here are nine fascinating quotes from his book.
1. We have been predicting oil's demise for 130 years:
The State Geologist of Pennsylvania warned in 1885 that "the amazing exhibition of oil" was only a "temporary and vanishing phenomenon -- one which young men will live to see come to its natural end." That same year, John Archbold, Rockefeller's partner in Standard Oil, was told that the decline in American production was almost inevitable. Alarmed, he sold some of his Standard Oil shares at a discount. Later, hearing that there might be oil in Oklahoma, he replied, "Why, I'll drink every gallon produced west of the Mississippi." Yet not long after, new fields were discovered -- in Ohio, Kansas, and then the huge fields of Oklahoma and Texas.
2. Its impact on geopolitics can't be understated:
The outbreak of World War II turned that glut into an enormous and immensely valuable strategic reserve. Out of seven billion barrels used by the Allies, six billion came from the United States. Oil proved to be of key importance in so many different aspects of the struggle. Japan's fear of lack of access to oil -- which, in the words of the chief of its Naval General Staff, would turn its battleships into "nothing more than scarecrows" -- was one of the critical factors in Japan's decision to go to war. Hitler made his fateful decision to invade the Soviet Union not only because he hated the Slavs and the communists, but also so that he could get his hands on the oil resources of the Caucasus. The German U-boat campaign twice came close to cutting the oil line from North America to Europe. The Allies, in turn, were determined to disrupt the oil supplies of both Germany and Japan. Inadequate supplies of fuel put the brakes on both General Erwin Rommel's campaign in North Africa ("Shortage of petrol," he wrote his wife; "It's enough to make one weep") and General George Patton's sweep across France after the D Day landing.
3. There is more oil than we could possibly need. Extracting it profitably is the challenge:
The world has produced about 1 trillion barrels of oil since the start of the industry in the nineteenth century. Currently, it is thought that there are at least 5 trillion barrels of petroleum resources, of which 1.4 trillion is sufficiently developed and technically and economically accessible to count as proved plus probable reserves. Based upon current and prospective plans, it appears the world liquid production capacity should grow from about 93 million barrels per day in 2010 to about 110 mbd by 2030. This is about a 20 percent increase.
4. It has fooled us massively:
Still, some were skeptical of what might be found in Saudi Arabia. In 1926 the senior management of one petroleum company decided that Saudi Arabia was "devoid of all prospects" of oil and that big reserves would most likely be found in Albania. In the 1930s, after several years of disappointment and dry holes, even the companies exploring in Saudi Arabia debated "whether the venture should be abandoned" and "written off as a total loss."
5. As technology improves, we are "discovering" more and more:
According to one study by the United States Geological Survey, 86 percent of oil reserves in the United States are the result not of what is estimated at time of discovery but of the revisions and additions that come with further development. The difference was summed up by Mark Moody-Stuart, the former chairman of Royal Dutch Shell, recalling his own days as an exploration geologist out in the field: "We used to joke all the time that much more oil was discovered by the petroleum engineers, developing and expanding the fields, than by us explorers, who actually found the fields."
6. Conservation and efficiency has massively increased energy productivity:
There is one key energy source that most people do not think of as an energy source. Sometimes it is called conservation; sometimes efficiency. It is hard to conceptualize and hard to mobilize and yet it can make the biggest contribution of all to the energy balance in the years immediately ahead [...]
The United States uses less than half as much energy for every unit of GDP as it did in the 1970s. A good part of the improvement is certainly pure efficiency. A new car in the 1970s might have averaged 13.5 miles to every gallon. Today, on a fleet average basis, a new car is required to get 30.2 miles per gallon [...]
And by the end of the 1990s, the smog-causing emissions coming out of the tailpipe of a new car were only 1 percent of what they had been in the 1970s; 99 percent had been eliminated.
7. Changes in the coming decades will be profound:
Currently, oil use in the developed world averages 14 barrels per person per year. In the developing world, it is only 3 barrels per person. How will the world cope when billions of people go from 3 barrels to 6 barrels per person? [...]
The growth in world energy demand in the coming decades will be very large. The increase alone will be greater than all the energy that the world consumed in 1970. This increase is really a measure of success -- of a more prosperous global economy, of rising standards of living, of billions of people moving out of poverty. In terms of oil, North America, Europe, and Japan have already reached peak demand. Because of demographics, increased efficiency, and substitution, their petroleum consumption will be flat or declining.
8. Countries have been trying to limit their dependence on it for decades:
"The United States is on the threshold of a profound chemical revolution," said the New York Times in 1948. "The next ten years will see the rise of a massive new industry which will free us from dependence on foreign sources of oil. Gasoline will be produced from coal, air, and water." [...]
Churchill responded with what would become a fundamental touchstone of energy security: diversification of supply. "On no one quality, on no one process, on no one country, on no one route, and on no one field must we be dependent," he told Parliament in July 1913. "Safety and certainty in oil lie in variety and variety alone." That precept has proved itself again and again.
9. Despite new green energy products, oil will be here for a while:
History demonstrates that energy transition generally takes a long time. It took almost a century before oil overtook coal as the number one energy source.
More from The Motley Fool: Our retirement experts explain a straightforward way to increase retirement income.
Contact Morgan Housel at email@example.com. The Motley Fool has a disclosure policy.