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New Horizons. Because of Jacobsen and the other great gamblers in oil, the U.S. oil industry has been able to make liars of the professors and bureaucrats who have periodically announced that the U.S. would soon run out of oil. In 1908, one expert put U.S. oil reserves at 15 billion bbls. Yet in the years since, the U.S. has burned about 40 billion, has proved up another 12 billion in reserves. It has managed to add to reserves every year despite today's record rate of consumption of 2.7 billion bbls. a year.
One of the major reasons why the U.S. has found as well as consumed more oil each year, says Jacobsen, is the impetus given to oil hunting by the Government's depletion allowance. (A similar allowance is also given on other minerals and on lumber.) Though Harry Truman and other Fair Deal politicos have railed against it as a tax steal, Jacobsen points out that the allowance has made possible a multitude of industries based on expanding oil production, and thus vastly added to the corporate taxpayers. "Moreover," says Jacobsen, "gasoline is lower-priced today, without taxes, than it was in 1926. If higher taxes had cut oil production, gasoline might cost 30 or 40¢ a gallon. If the price were this high, few people could afford it, and the Government would lose millions in taxes."
Despite the vast increase in oil reserves, the nation's demands for oil are still growing faster than U.S. production. Overall demand has been rising at an average rate of 5% a year, which means that by 1960 the U.S. will need 3.5 billion bbls. a year.
Jacobsen doubts that the U.S. will ever run out of oil. Oilmen estimate that of 2,400,000 square miles on the earth where oil may exist, only 1% has ever been explored. One huge, virtually unexplored such frontier is Alaska. On all such virgin horizons, Explorer Jacobsen cocks his questing, tireless eye.
* Sam Weaver was an old driller who provided one of the industry's classic anecdotes. Some 40 years ago, his crew was about to start drilling in Mexico in a cow pasture, when one of the crew asked Weaver where to drill. Replied Weaver: "Watch the cows and drill where the first cow pie falls."
* Oil hunters can write off the entire cost of a dry hole. They can write off much of the cost of a producing well, including all "intangibles" such as labor, fuel and drilling materials, which amount to two-thirds of the cost. Moreover, once the oil flows, 27½% of it is tax-free because of a depletion allowance.
*By 1940, when the British government took over the shares to pay for arms purchases, the Cowdray family held 17%. For this, the British government paid $5,000,000 in its own bonds at Amerada's then market price. The same shares were worth $100 million at this year's peak price, and Britain recently began selling them in the U.S. (Phelps Dodge Corp., copper producers, bought $19 million worth, thus got a 3% interest in Amerada.)
† He resigned in 1932 to found his own famous Dallas consulting firm.