Beyond Oil

Black Gold

In 1901, near the once sleepy southeast Texas town of Beaumont, oil gushed forth from the Spindletop well and made history. Spindletop ushered in the Texas oil boom and the modern petroleum industry.

Today, a short drive from Spindletop, you can visit the heart of America’s refining capacity on the Gulf Coast. The refineries are getting old. In fact, despite prodigious oil profits, not a single new refinery has been built in the U.S. since 1976. The mammoth oil tankers in U.S. ports are as impressive as ever, but older tankers are being retired faster than new ones are being built – despite the fact that all the tankers are booked.

What accounts for this unwillingness to increase capacity even in the face of strong demand? The oil companies know production has peaked. Why build new tankers and new oil refining capacity when you know that oil production is inevitably trending down?

The idea that oil production passed its peak and is now declining really shouldn’t come as a surprise. Back in 1956, M. King Hubbert, an obscure American geologist, predicted that oil production in the U.S. would peak in the early 1970s. His theory, which later became...