(If Texas, which controlled world oil prices for about 35 years, were the sole source of crude oil today, for every four gallons of gasoline that we bought in 1972, we would be bidding for one gallon today--despite the use of every technological advance known to the oil industry.  Consider this as you read the following excerpt from the infamous 2004 column on Daniel Yergin.)

Digital Rules
Capitalism's Amazing Resilience
Rich Karlgaard (Forbes Magazine), 11.01.04

Excerpts:

Where will oil prices be a year from now (now being 11/1/04)--$75 a barrel? $100?

Wrong numbers, says Daniel Yergin. Wrong direction, too. Try $38. Yergin knows oil. He is a founder and the chairman of Cambridge Energy Research Associates, a consultancy that has 230 employees, with offices worldwide. He is also a recipient of the United States Energy Award and a member of the Secretary of Energy's Advisory Board. A former Harvard professor, Yergin is best known for his Pulitzer Prize-winning book on oil, The Prize: The Epic Quest for Oil, Money and Power.

Yergin's prediction of cheaper oil prices is noteworthy because he doesn't dispute any of the alarming facts cited in my opening paragraph. Not that he would. The facts came straight from Yergin's own mouth at the recent Forbes Global CEO Conference in Hong Kong. I jotted down Yergin's comments while listening to him speak at a dinner. Then he gave a formal speech the next morning and, fueled this time by highly caffeinated tea, I again took notes, just to be sure. Yergin is pretty clear about his predictions. He says oil demand will rise, yet prices will drop. How can this be?

Answer: capitalism's amazing resiliency. Oil prices rise--oilmen become innovative. They work, they invest, they put their heads to the task, they apply technology, and pretty soon they'll discover how to extract oil profitably from oil sand. Or open wells in deeper water. Or scour the planet for new sources using scanners thousands of miles in space. As Yergin reminds us, oil output is 60% higher today than it was in the 1970s. Not many sages from the 1970s would have bet their reputations on this development. The opposite sentiment prevailed back then; experts said the planet was running out of oil. Wrong.

Yergin says he's always asked when oil will run out for good. He shrugs. He's willing to say the world will need 40% more oil in 2025. Hard work and technology probably will find a way to meet the demand.