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What is Peak Oil?

What is Peak Oil?

By Jeff Youngs, August 10, 2012

Peak oil refers to the point in time when global oil production will reach its maximum rate, and then begin a gradual decline until all supplies are exhausted.

Marion King Hubbert, a geoscientist working for Shell Oil Company in the 1950s, developed the peak oil theory and modeling. In 1956, Hubbert created the Hubbert Curve and Hubbert peak theory to accurately predict that U.S. oil production would reach its peak between 1965 and 1970. (It peaked in 1970).

According to Mr. Hubbert's theory, as explained on Wikipedia, "the aggregate production rate from an oil field over time usually grows exponentially until the rate peaks and then declines--sometimes rapidly--until the field is depleted." This theory can be applied to the sum of a country's production rate, as well as to the global rate of production.

Globally, oil production reached its highest level ever in 2011, after years of decline following a similar peak in 2005. Experts disagree about when the world's oil production will peak. Some believe that it has already occurred; some think that it is about to occur; and some predict that peak oil production will be reached in 2020.

Experts agree, however, that in the years following the peak of global oil production, oil prices, and the cost of consumer goods and services, will rise due to modern industrial infrastructure's dependence on a cheap and abundant supply of oil. It will not be until alternative sources of energy begin to replace oil that prices will fall to historical norms.


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