Last week we wrote about Peak Oil propaganda and how predictions of the death of the oil industry were grossly exaggerated. Later that week, BP Plc announced a major, major find in deep waters in the Gulf of Mexico expected to eventually yield 300,000 to 400,000 barrels of oil per day, or about half the capacity from all of Alaska’s North Slope.

Those are heady numbers, even for an industry accustomed to dealing in very large volumes. So here’s another way to wrap your head around the magnitude of BP’s gusher: Early estimates are placing the total reserves at at least four billion barrels of oil and natural gas. Assuming a reasonable 35% recovery rate, this single site  could account for about 5% of BP’s total proven oil reserves worldwide.

The fact that it is coming from a region often considered past its oil-producing prime offers a tantalizing sense for how much oil may still be out there waiting to be found.

BP owes this game-changing discovery to an aggressive commitment to explore for new oil, advanced technology that has in recent years enabled it to dig deeper, and government policies that have helped oil companies bear the cost.

Indeed, the newly-discovered oil is 36,000 feet below the Gulf floor, or as described by the Houston Chronicle, nearly a mile deeper than Mount Everest is high.

Not really a gusher at all, this is oil that will require a lot more work and investment to get anywhere close to the earth’s surface. It will likely not be a producing field for more than a decade. The daunting challenge of reaching oil trapped so far beneath the ground has often led critics to argue that it is just not economically feasible to produce. As BP’s massive discovery shows, even the most expensive projects may be cost effective when the volumes being produced are large enough. No one, after all, is suggesting now that BP should walk away from this find.

In the earliest days of oil, most fields were found just a few hundred feet below ground, so shallow that when oil was struck it literally gushed to the surface like a geyser. 3-D seismic drilling technology led to wells dug at 10,000 feet or more below ground. And in 1995, President Bill Clinton recognized the need for new policies for a rapidly-changing industry. He signed the Deep Water Royalty Relief Act to ease the burden of royalties on oil produced at great depths in order to encourage further exploration and development.

Just as the earliest oil producers could not have conceptualized the technology that would transform their industry, they probably could not have predicted the need for government policies such as royalty relief to spur continued exploration and innovation. Those who go around promoting Peak Oil are often blind to the industry’s real potential. Reaching that potential will require a lot of hard work, friendly policies that evolve with the industry … and the ability to think big. (And deep.)