(Hathaway literally is a farmer as well; his enormous house, a hollowed-out foreclosure property that he bought in 2009 after the real-estate crash, sits on 200 acres of rolling wheat fields, studded with about a dozen oil pumps.)
Things used to be different. Hathaway’s grandfather, Jesse Elworth Hathaway, was a true wildcatter. He drilled for oil in Bakersfield and across the West in the 1950s, when the U.S. produced millions of barrels more oil than it consumed. Jesse Elworth knew that the oil that his company, Pyramid, pumped from his wildcat wells would go to fuel American cars and build American cities. One Sunday afternoon, an employee left a valve open on a tank on his Santa Maria wells, and the oil spewed out violently. Jesse died of a massive heart attack trying to plug the well.
That year, 1983, Chad’s father, Jesse Benjamin Hathaway, took over the company. By then, the oil industry had undergone a dramatic shift. In 1970, the United States, for the first time, pegged its oil prices to the global oil market. Most Americans didn’t notice the change when it happened, but they were rudely awakened to the new reality in 1973, when OPEC nations cut off supplies to the U.S. and ratcheted up prices. For the Hathaway family, the painful reality of their new dependence on the global oil market came in the ’80s and ’90s, when prices sank to record lows and they struggled to get by. Jesse Benjamin went for weeks without a paycheck; the strain ultimately contributed to his divorce.
In 1998, global oil prices hit bottom—below $10 a barrel—and so did the Hathaway family fortunes. Chad received a leukemia diagnosis and had to drop out of college; his mother, a teacher, took donated leave from her colleagues to stay home and take care of him. In 2001, with a $5,000 loan from his mother, Chad started his own oil company. He loves the business, but he reminds himself every day how little control he has over his fate.
Like his house and the other oil fields he owns, Hathaway bought his biggest oil field, named Jasmine, used, and he decided long ago not to waste his time looking for new oil. “My grandfather was a wildcatter. My dad wasn’t as much of a risk-taker. He was just trying to survive. To me, losing money’s not fun. I’d rather be the guy who hits singles and doubles all day long,” he says. “I think I’m more uncomfortable with high prices than with low. I’m not comfortable when gas prices are too high. It’s not good for the economy. It means there’s going to be another bust.”
Instead, he’s doing what a lot of the most successful oil producers are doing—buying old oil fields that have had about 30 or 40 percent of their reserves extracted, and using steam and other technologies to get out the rest. “That’s the future,” he says. “Going back and squeezing out what’s left. With steam, we can get out 70 to 80 percent.” After spending his entire life in the business, Hathaway is pretty sure that the planet is running out of oil. “I’ll keep my mouth shut about it with my peers, but I thoroughly believe in it. Oil’s not a replenishable resource,” he says.
NEW SUPPLY, OLD PROBLEM
Even geologists who don’t necessarily believe that the world has entered the era of “peak oil”—the point at which the finite resource has been fully exploited and production can only decline—agree that we’ve probably reached the end of “easy oil.” Drillers are discovering new sources of oil, but they’re finding it in evermore difficult places—shale-rock formations; ultra-deepwater wells, such as the Gulf of Mexico’s exploding Macondo; and treacherous new frontiers, such as the Arctic Ocean. This kind of drilling comes preloaded with its own volatility, and the risks of trying to find oil in increasingly unstable places will also get priced into the market.
That new oil won’t be nearly enough to make the United States oil-independent, because Americans consume almost twice as much oil as we produce, ensuring that our nation will be a net importer of oil for decades to come. And the new oil won’t do enough to pull people like Lutrel and Hathaway off the roller coaster they’re riding.
“The only way booming U.S. production changes the basic volatility picture is if there’s lots more OPEC growth in supply and a big reduction in demand—and I wouldn’t want to bank on that,” says Levi. “The new U.S. production might keep a cap on prices at the margin, but it doesn’t come close to insulating the economy as a whole.”
The travails of Lutrel Trucking offer a preview of what’s to come. When prices go up, the Lutrels add surcharges to the loads they carry—wheat, grain, cattle feed, and fertilizer—which will have a cascading effect on the price of bread, milk, beef, and other commodities. “Everybody’s affected by the cost of transportation,” says Mark Lutrel. “All the goods and services in this country are transported in some form or other.”