Peak oil is a term that applies to the point when global petroleum extraction is at its maximum. The key here is the term “extraction.” Peak does not mean that the majority of oil resources have been used, but rather means that the rate at which petroleum can be extracted has reached a maximum. A number of factors contribute to a reduction in the speed with which oil can be produced. Peak oil production also implies that demand cannot be met by increasing production, which leads to higher prices.
The concept of global peak oil is based on observations of similar trends in individual wells. The rate of production of individual wells grows exponentially from discovery until a peak is reached, at which point production steadily, and sometimes swiftly, declines. Peak oil production on a global scale is often expressed as a Hubbert curve.
The Hubbert curve is named after M. King Hubbert who was the first, in 1956, to accurately predict peak oil production in the United States. He developed a logistic model that took into account market factors, technological advancement, estimated reserves, and production rates to predict peak production not oil for oil, but for many other limited resources. He found that limited resources follow a logistic distribution curve in which production generally outpaces demand until reaching peak, at which point production falls regardless of demand.
Global Peak Oil
Current estimates based on the Hubbert model indicate that world peak oil will take place in roughly 2020. Several different factors have lead to this conclusion including global demand/supply and production technology.
Demand for petroleum comes from multiple commercial, industrial and residential sectors, though none so much as the transportation industry. Transportation accounts for nearly 70% of all oil consumption globally, which in 2007 reached a high of 85.6 million barrels per day. The largest growth in demand is from developing countries, but the largest consumers of oil are industrial nations. The United States consumed roughly 21 million barrels of oil in 2007.
Former chairmen from Exxon Mobile and Shell Oil have both expressed concern that easy to extract oil and gas deposits have been exhausted and that future finds will require exploration of more challenging environments.
Peak oil field discovery occurred in 1965, and has, following the Hubbert curve, dropped off predictably. The discovery rate in 1965 was 55 billion barrels per year. Today the rate is less than 10 billion barrels per year. In 1980, production surpassed discovery for the first time.
At the point in time when peak oil occurs, production becomes the bottleneck to supply and demand for petroleum. Due to population growth, peak oil production per capita has already occurred, though use of petroleum is not evenly distributed among individuals. In the last decade, investment by oil companies in difficult to reach deposits has become a clear signal that peak either has been reached or is near.
Globally, of the largest 21 oil fields, 9 are in decline. Production from these fields is decreasing at a rate of 8% per year. Current estimates put the global rate of decline of the largest 811 oil fields at 6.75 per year. In 2007, Saudi Arabia, the world’s largest oil producer, was unable to increase production to counter rising oil prices, a sign that major suppliers are operating at or near peak capacity.
Timing of the Peak
In 2005, worldwide production of oil reached its peak and produced a surplus of oil in the supply and demand scheme. In 2010, the US military’s Joint Forces Command warned that by 2012, the surplus would disappear and that by 2015 there could be a deficit in production of as much as 10 million barrels per day. The concern, on the part of the military, is the reduced supply would result in stagnation of economic growth and an exacerbation of “unresolved tensions.” Not everyone agrees with this prediction however.
The Hubbert model, and Hubbert himself, predicted in 1974 that peak oil would occur in 1995 based on then current trends. A decrease in consumption, due primarily to the introduction of energy-efficient cars in the 1990s, resulted in a shift in that prediction to 2020.
Determining peak oil will only be possible in retrospect, but predictions suffice to spur investment in alternative energies and increase conservation efforts. While some experts predict that peak oil has or is occurring, other believe that enhanced production and conservation efforts mean that oil supply will remain consistent for the next 100 years. What is important to note, however, is that retrospective resolution of the problems that peak will cause will be difficult, if not impossible. Early, preemptive intervention will be more successful and maintain global stability. This is the reason many experts insist that measures be taken now to reduce dependence on oil and move to more sustainable forms of energy.