What is Peak Oil?

Oil PumpWhat is Peak Oil? The term “peak oil” is used to describe the point at which the earth’s supply of oil will no longer be able to meet our energy needs. Oil is not a renewable energy source, and therefore can and will be exhausted at some point in the future. There is still a lot of debate about the projected date of peak oil due to our inability to accurately take stock of current world oil supplies. As early as the 1950’s geologists have been warning of an oil supply collapse. M. King Hubbert noticed a logistics curve in oil discoveries and based on these findings he predicted that there would be a global oil peak between the year 1995 and 2000.

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Peak Oil is the simplest label for the problem of energy resource depletion, or more specifically, the peak in global oil production. Oil is a finite, non-renewable resource, one that has powered phenomenal economic and population growth over the last century and a half. The rate of oil ‘production,’ meaning extraction and refining (currently about 84 million barrels/day), has grown in most years over the last century, but once we go through the halfway point of all reserves, production becomes ever more likely to decline, hence ‘peak’. Peak Oil means not ‘running out of oil’, but ‘running out of cheap oil’. For societies leveraged on ever increasing amounts of cheap oil, the consequences may be dire. Without significant successful cultural reform, economic and social decline seems inevitable.

Why does oil peak?

Oil companies have, extracted the easier-to-reach, cheap oil first. The oil pumped first was on land, near the surface, under pressure, light and ’sweet’ (meaning low sulfur content) and therefore easy to refine into gasoline. The remaining oil, sometimes off shore, far from markets, in smaller fields, or of lesser quality, takes ever more money and energy to extract and refine. Under these conditions, the rate of extraction inevitably drops. Furthermore, all oil fields eventually reach a point where they become economically, and energetically, no longer viable. If it takes the energy of a barrel of oil to extract a barrel of oil, then further extraction is pointless.

Who came up with the idea of Peak Oil?
M. King Hubbert

In the 1950s a U.S. geologist working for Shell, M. King Hubbert, noticed that oil discoveries graphed over time, tended to follow a bell shape curve. He posited that the rate of oil production would follow a similar curve, now known as the Hubbert Curve (see figure). In 1956 Hubbert predicted that production from the US lower 48 states would peak between 1965 and 1970. Shell tried to pressure Hubbert into not making his projections public, but the notoriously stubborn Hubbert went ahead and released them. In anycase, most people inside and outside the industry quickly dismissed Hubbert’s predictions. In 1970 US oil producers had never produced as much, and Hubbert’s predictions were a fading memory. But Hubbert was right, US continental oil production did peak in 1970, although it was not widely recognized for several years, and only with the benefit of hindsight.

No oil producing region fits the bell shaped curve exactly because production is dependent on various geological, economic and political factors, but the Hubbert Curve remains a powerful predictive tool.

Although it passed by largely unnoticed, the U.S. oil peak was arguably the most significant geopolitical event of the mid to late 20th Century, creating the conditions for the energy crises of the 1970s, leading to far greater U.S. strategic emphasis on controling foreign sources of oil, and spelling the begining of the end of the status of the U.S as the world’s major creditor nation. The U.S. of course was able to import oil from elsewhere, and life continued there with only minimal interuption. When global oil production peaks however, the implications will be far greater.

So when will oil peak globally?

Hubbert went on to predict a global oil peak between 1995 and 2000. He may have been close to the mark except that the oil shocks of the 1970s slowed our use of oil. As the following figure shows, global oil discovery peaked in the late 1960s. Since the mid-1980s, oil companies have been finding less oil than we have been consuming.

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