(FORTUNE Magazine) – People have worried that the world will run out of oil almost since Colonel Drake drilled the first well in Pennsylvania in 1859. As early as 1874, Pennsylvania's chief geologist predicted that kerosene used for lighting would exhaust U.S. petroleum reserves by 1878. In 1939, and again in 1951, the Department of the Interior added up all the reserves in the world and reported, both times, that 13 years of oil remained. So much for those predictions. Still, much of the political and economic maneuvering--not to mention the armed conflict--of the 20th century has been over oil. Because that could be even more the case in the next century, when oil consumption is bound to increase as more of the world's economies modernize, it seems appropriate to raise anew the eternal questions about oil: How much is left, and how long will it last?

The answers are mostly reassuring, once you dismiss the doomsday opinions of a renegade band--call them the neo-Malthusians--who say shortages could develop very soon. They believe global oil production could peak soon and then start to decline rapidly. Prices could spike, leveling stock markets, endangering economies, and leading to war once again.

Their argument goes like this: Oil is a finite resource. Nearly half the oil that exists has been used. This halfway point between what has been pumped and what is left to pump is critical. Once it is reached, perhaps as early as next year, production will peak and then decline sharply. As production falls, the gap between supply and demand will grow, pushing up prices and causing shortages. "When you accept that there is a limit to the amount of oil, you accept that there is a peak in production," says Colin J. Campbell, a consulting geologist whose views have been published in Scientific American and elsewhere. "One can imagine a colossal political crisis if the price goes to $40 or $60 a barrel." He worries that Western nations, fearful the Middle East had a stranglehold on the world's economies, would resort to military intervention to secure their oil.

Most experts do not believe Campbell's prediction of apocalypse any day now. "This analysis is a piece of foolishness," says M.A. Adelman, emeritus professor of economics at MIT. "The world will never run out of oil, not in 10,000 years." Adelman and others believe Campbell has ignored oil reserves that companies have not yet found because they haven't invested the capital to identify them. The Beverly Hillbillies notwithstanding, oil doesn't just bubble out of the ground. It is expensive to locate and develop, so people don't look for it until they need it. "In order to have reserves, you have to invest in them," says James L. Smith, who teaches oil and gas management at the Edwin L. Cox business school at Southern Methodist University.

Nor is oil the only resource in the ground that produces energy. There are also tar sands, oil shale, and heavy oil--collectively known as "unconventional oil." Campbell tends to dismiss oil substitutes because they would be expensive to develop and would damage the environment. Still, the U.S. Department of Energy estimates that tar sands in Canada and extra-heavy oil in Venezuela contain the equivalent of about one trillion barrels of oil--slightly more than all the oil that has ever been burned. It also figures that global oil shale deposits--one-third of them in the U.S.--could hold another 15 trillion barrels. In all, the government estimates that by about 2020, two trillion barrels of unconventional oil could be produced from various sources at a cost of $30 per barrel.

Most predictions for an oil-plentiful future depend on developing new technologies for finding and extracting oil. Campbell describes this technology as "largely mythical" and argues that it will be of little use because of the way oil occurs geologically. Unlike coal, which lies in seams that blend into the earth, oil is deposited in pools of finite capacity. New techniques allow drillers to empty existing pools more quickly, says Campbell, but don't help find additional reserves--of which there aren't many, he adds. "There is only so much crude oil in the world," he writes, "and the industry has found about 90% of it."

But drillers are discovering oil today in places they couldn't even get to five or ten years ago. Says Andrew Hardiman, an expert in deep-water exploration for Chevron: "Technology is coming faster and cheaper than anyone imagined." In 1965, drillers could operate in water up to 300 feet deep. Today, Chevron is leasing blocks of land in the Gulf of Mexico 9,000 feet underwater, and Hardiman says drilling in 10,000 feet isn't far off. Deep-water drilling is expensive; Chevron rents drill ships that cost up to $350,000 a day. But the company has become much more efficient at operating them. Chevron and others are developing a technique called subsea mud-lift drilling, which enables drillers to leave residue on the ocean floor instead of creating an unwieldy hydrostatic column to suck it up through a pipe. This could save drillers $5 million to $10 million per well.

New tools like three-dimensional seismic analysis enable oil companies to bounce sound waves off oil-bearing deposits and translate the patterns into 3-D models. Drilling rigs using the technique find productive wells more than 70% of the time, vs. 40% with conventional seismic analysis. Robert Esser, director of global oil and gas resources for Cambridge Energy Research Associates, says, "More oil was found in 1999 than in any other year in this decade. There is plenty more oil in the Middle East and Brazil, and in the Caspian Sea region." In addition, producers are getting smarter at extracting oil from existing reserves. Major U.S. producers can now pump as much as 50% of the oil from a given pool, vs. a worldwide average of less than 35%. Esser sees worldwide production rising from 77 million barrels a day this year to 97 million barrels a day in 2010, without a peak in sight.

The fact is that estimates of the amount of oil in the earth have been increasing for almost 80 years (see chart). As the Energy Information Agency of the Department of Energy concluded in a recent report: "When undiscovered oil, efficiency improvements, and the exploitation of unconventional crude oil resources are taken into account, it is difficult not to be optimistic about the long-term prospects for oil as a viable energy source well into the future." Adds Marianne Kah, Conoco's chief economist: "The question is, Will technology continue to offset resource depletion as it has for the last 100 years? I believe it will. Why should the next ten years be different?"

Over time, the world has never run out of an important commodity because, before it does, a substitute is found. The discovery of oil meant that the mines of the U.S. and England weren't stripped of their coal. The discovery of coal kept Western Europeans from turning every forest tree into firewood. Technology and ingenuity tend to produce new solutions. Simple economics also dictates that oil will not become a scarce resource. Whenever production starts to lag, market pressures push prices higher. That, in turn, leads to better conservation efforts, wider use of previously uneconomical oil fields, and an expanded search for oil substitutes.

That is not to say the world will be free of oil worries. The possibility for interruptions of short-term supplies always exists. So does the opportunity for political mischief. Some 30% of the world's oil reserves are held by five Middle East countries: Iran, Iraq, Kuwait, Saudi Arabia, and Abu Dhabi. Events could unfold there in unpredictable ways. What kind of chaos would result, for example, if a band of environmentalists gained power in Saudi Arabia and decided it didn't want to see derricks in the desert?

Ecological concerns and social pressures make it unlikely that we will continue to consume oil indefinitely at the rate we have in the past. Automakers are already moving toward hybrid engines that burn less gasoline; the first fuel-cell cars, which produce electricity from hydrogen, will be available by 2004. Natural gas is increasingly being used as a substitute for oil in the U.S. and Europe. Still, it is reassuring to know that the preponderance of opinion and a lot of historical evidence suggest that there will be oil around for as long as we need it.

REPORTER ASSOCIATE Natasha Tarpley