Petrobras announced Nov. 8 it has found between 5 billion and 8 billion barrels of light oil and gas at the Tupi field, 155 miles offshore southern Brazil in an area it shares with Britain's BG Group and Portugal's Galp Energy. Tupi is the world's biggest oil find since a 12 billion-barrel Kazakh field was discovered in 2000, and the largest ever in deep waters. Perhaps more important, Petrobras believes Tupi may be Brazil's first of several new "elephants," an industry term for outsize fields of more than 1 billion barrels.
Initially, Tupi will produce about 100,000 barrels a day but may ramp up to as much as 1 million before 2020—more than the biggest U.S. field in Alaska's Prudhoe Bay, says Hugo Repsold, Petrobras' exploration and production strategy manager. "It's monstrous," says Matthew Shaw, a Latin America energy analyst at consultant Wood Mackenzie in London.
The oil industry is known for its "boom and bust" cycles. There is little doubt that the high oil prices are fueling the current boom. Although the article touts that this kills the idea of "peak oil," in reality it doesn't completely disprove the theory. The real idea of peak oil -- as I understand it -- is that oil will become increasingly expensive to extract.
Furthermore, the increasing use of hydrocarbons produce other environmental challenges due to the pollutants its use creates. These costs are externalities and cannot easily be quantified.
The high oil prices will also spur investment and study into alternative sources of energy. This will also reduce demand for oil as these alternative energy sources come into use. So far, the biggest impediment to alternative energy uses has been the NIMBY problem and (up to now) relatively large start-up expense. The latter issue is quickly resolving itself; what remains is to convince the public that some scenic views may have to be sacrificed, and (in the case of nuclear energy, if needed) that disposal of nuclear waste will have to be effected.
At some point, we will need to consider public financing of infrastructure to support the alternative energy sectors. I would find an analogy in the creation of railroads and highways. The real problem is how to avoid the problems of the past, namely: private profits underwritten from the socialization of costs.