Hubbert peak theory

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The Hubbert peak theory, also known as "peak oil", concerns the long-term rate of conventional oil (and other fossil fuel) extraction and depletion. It is named after American geophysicist M. King Hubbert, who created a model of known reserves, and proposed, in 1956, in a paper he presented [1] at a meeting of the American Petroleum Institute, that oil production in the continental United States would peak between 1965 and 1970; and that world production would peak in 2000.

U.S. oil production peaked in 1971 [2], and has been decreasing since then. Global production did not peak in 2000, but Hubbert's model did not account for the 1973 and 1979 OPEC oil shocks, which effectively reduced global demand for oil and delayed the peak.

Given that oil is a non-renewable resource, it is inevitable that at some point there will be a similar peak in worldwide oil production. Hubbert's theory is that the same calculations that successfully predicted the peak in oil production in the USA would apply to other circumstances, such as the peak in worldwide oil production. Various estimates for the worldwide peak have been made by Hubbert and others, with some of these dates already having passed. This has led to criticism of the method and predictions made using the method.

Hubbert's peak theory is subject to continued discussion because of the potential effects of lowered oil production, and because of the ongoing debate over aspects of energy policy. Opinions on the effect of passing Hubbert's peak range from faith that the market economy will produce a solution to predictions of doomsday scenarios of a global economy unable to meet its energy needs. (See Implications section, below)

Some oil industry executives, economists, and analysts doubt that Hubbert's peak theory applies on a global scale. However, Chevron has launched the Will You Join Us? ad campaign, seeking to inform the public to the possibility of oil depletion and encourage discussion. The campaign's website notes findings from the International Energy Agency's (IEA) World Energy Outlook 2004: "Fossil fuels currently supply most of the world’s energy, and are expected to continue to do so for the foreseeable future. While supplies are currently abundant, they won’t last forever. Oil production is in decline in 33 of the 48 largest oil producing countries, ..."

Contents

Has it occurred?

An increasing number of theorists believe some peak in world oil production has already occurred. Colin Campbell of the Association for the Study of Peak Oil&Gas(ASPO) has calculated that the global production of conventional oil peaked in the spring of 2004 albeit at a rate of 23-GB/yr, not Hubbert's 13-GB/yr. After Hurricane Katrina, Saudi Arabia admitted that it simply could not increase production to make up for the loss of Gulf of Mexico oil rigs. This was widely believed, albeit speculatively, to be the beginning of a final oil crisis, in which the amount of oil available world-wide will enter a gradual yet terminal decline.

Nor is the crisis restricted to oil. Traditional natural gas supplies are also under the constraints of production peaks, which especially affect specific geographic regions because of the difficulty of transporting the resource over long distances. Natural gas production has already peaked on the North American continent (2003), while gas supplies in the North Sea have also peaked. UK production was at its highest point in 2000 and declining production and increased prices are now a sensitive political issue there. Even if new extraction techniques yield additional sources of natural gas, like coalbed methane, the EROEI (energy returned on energy invested) will be much lower than traditional gas sources, which inevitably leads to higher costs to consumers of natural gas.

View the list of Countries that have already passed their production peak.

Hubbert's theory

Image:Annual oil production.jpg Hubbert, a geophysicist, created a mathematical model of petroleum extraction which predicted that the total amount of oil extracted over time would follow a logistic curve. This implies that the predicted rate of oil extraction at any given time would be given by the rate of change of the logistic curve, which follows a bell-shaped pattern now known as the Hubbert curve (see figure on the right).

Given past oil production data and barring extraneous factors such as lack of demand, the model predicts the date of maximum oil production output for an oil field, multiple oil fields, or an entire region. This maximum output point is referred to as the peak. The period after the peak is referred to as depletion. The graph of the rate of oil production for an individual oil field over time follows a bell-shaped curve: first, a slow steady increase of production; then, a sharp increase; then, a plateau (the "peak"); and, finally, a steep decline.

When oil reserves are discovered, production is initially small, because all the required infrastructure has not been installed. As wells are drilled and more efficient facilities are installed, oil production increases. At some point, a peak output is reached that can not be exceeded, even with improved technology or additional drilling. After the peak, oil production slowly but increasingly tapers off. After the peak, but before an oil field is empty, another significant point is reached when it takes more energy to recover, transport and process a barrel of oil than the amount of energy contained in that barrel. At that point, Hubbert theorized that it is no longer worthwhile to extract oil for energy, and the field might be abandoned. According to Hubbert's model, U.S. oil reserves would be exhausted before the end of the 21st century.

It should be noted that Hubbert's original formulations applied to a "theoretical, unconstrained province" and that the model must be adjusted if significant artificial impedances (such as political or environmental regulations) are in effect.

Peak prediction

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Few would disagree with the statement that fossil fuels are finite and that alternative energy sources must be found in the future. Most critics instead argue that the peak will not occur soon and that the form of the peak may be irregular and extended rather than a sharp logistic curve peak. Like any mathematical model, the accuracy of the prediction is limited by the accuracy of the input data. If variables such as consumption are estimated incorrectly, then the formula will yield incorrect results.

In 1971, Hubbert used high and low estimates of global oil reserve data to predict that global oil production would peak between 1995 and 2000. ASPO has calculated that the annual production peak of conventional crude oil was in early 2004. However, it should be noted that other events that occurred after Hubbert's prediction may have delayed the peak, especially the 1973 energy crisis, in which a decreased supply of oil resulted in a shortage, and ultimately less consumption. The 1979 energy crisis and 1990 spike in the price of oil due to the Gulf War have had similar, albeit less dramatic effects on supply. On the demand side, recessions in the early 1980s and '90s have decreased the demand and consumption of oil. All of these effects would theoretically delay peak oil.

The Association for the Study of Peak Oil and Gas (ASPO) was founded by the geologist Colin Campbell. Based on current information about known oil reserves, estimates of future discovery, growing oil demand, and available technology, the ASPO predicts that world oil production will peak around the year 2010. Natural gas is expected to peak anywhere from 2010 to 2020 (Bentley, 2002).

In 2004, 30 billion barrels of oil were consumed worldwide, while only eight billion barrels of new oil reserves were discovered. Huge, easily exploitable oil fields are most likely a thing of the past. In August 2005, the International Energy Agency reported annual global demand at 84.9 million barrels per day which means over 31 billion barrels annually. This means consumption is now within 2-mbd of production. At any one time there are about 54 days of stock in the OECD system plus 37 days in emergency stockpiles.

The United States Geological Survey estimates [3] that there are enough petroleum reserves to continue current production rates for 50 to 100 years. A year 2000 USGS study of world-wide oil reserves predicted a possible peak in oil production around the year 2037. That is countered by an important Saudi oil industry insider who says the American government's forecast for future oil supply is a "dangerous over-estimate."[4] Campbell argues that the USGS estimates are methodologically flawed. One problem, for example, is that OPEC countries overestimate their reserves to get higher oil quotas and to avoid internal critique. Population and economic growth may lead to increased energy consumption in the future.

Further, the USGS reserve estimate appears to owe as much to politics as to research. According to the Energy Information Administration of the United States Department of Energy, "estimates are based on non-technical considerations that support domestic supply growth to the levels necessary to meet projected demand levels. [emphasis added]" (Annual Energy Outlook 1998 With Projections to 2020[5]).

Energy return on investment

When oil production first began in the mid-nineteenth century, the largest oil fields recovered fifty barrels of oil for every barrel used in the extraction, transportation and refining. This ratio is often referred to as the Energy Return on Investment (EROI or EROEI). This ratio becomes increasingly inefficient over time: currently, between one and five barrels of oil are recovered for each barrel used in the recovery process. The reason for this efficiency decrease is that oil becomes harder to extract as an oil field is drained.

Certain types of energy are more convenient than others—because of the energy density and relative safety of gasoline at room temperature and atmospheric pressure, it is uniquely suitable for transportation. Oil is also usable as a chemical feedstock, whereas sources such as wind and solar are not. Therefore, it is possible that oil would continue to be extracted and refined even after it consumes net energy to do so.

Cultural Awareness

Image:Peakoil.jpg Hubbert's research and awareness of Hubbert peak theory is becoming a more prevalent sociological phenomenon. For example, a peaknik is a person who studies or has an interest in the Hubbert Peak theory of oil depletion and is concerned for the possible long-term effects on society. Peaknik may also refer to people involved in promoting public awareness of Peak Oil. The word Peaknik is a neologism - it is a variation of the term peacenik. The use of "-nik" evokes a counterculture attitude to the status quo.

The term Doomer is sometimes used to describe Peakniks that believe there will be severe implications of peak oil.

Implications of a world peak

Main article: Implications of peak oil Image:TrendLinesOilDepletionScenarios41211.png It is clear that any global decline in oil supply will have serious social and economic implications. Global economic growth is predicated upon cheap energy and oil contributes significantly to the worldwide energy pool. As energy supply declines so too will growth. This fact applies equally to individual organisms as it does to groups and societies.

Initially a peak in oil production would manifest itself as structural worldwide oil shortage. This shortage would differ from shortages of the past because the fundamental cause is geological not political. While past shortages stemmed from a temporary insufficiency of supply, crossing Hubbert's Peak means that the production of oil continues to decline, and that demand must be reduced to meet supply. The effects of such a shortage depend on the rate of decline and the development and adoption of alternatives. If alternatives are not forthcoming, then the many products and services produced with oil become scarcer, leading to lower living standards in all countries. Scenarios range from doomsday scenarios to faith in the market economy and new technologies to solve the problem. In order to deal with those problems of peak oil Colin Campbell has proposed the Rimini protocol.

It is unlikely that the actual peak in global oil production will be the direct catalyst of global economic decline. Instead, severe economic turbulence will be precipitated by the realization of bankers that "peak oil" ( and natural gas) is a real phenomenon and either upon us or behind us. Significant indications of economic volatility have manifested themselves in the largest increase in inflation rates in 15 years (Sept. 2005), which were due mostly to higher energy costs. Since natural gas is the single largest feedstock (raw material) used to produce fertilizers, food costs are set to be dramatically higher next year (2006). This situation is exacerbated by exploding transportation costs as well. It should only be a (short) matter of time before this is fully recognized by investors.

The economic implications, however, do not end with higher food costs, or even greater levels of inflation. The situation in the First World is made even more dire by a number of confounding factors, which include:

  • Large government debt (in the US alone it is nearly $8 trillion)
  • The impending retirement of the baby-boomer generation and the general ageing of populations
  • Dependence of the largest employers on cheap, abundant, and immediately available forms of energy (i.e. the car industry, the airline industry, "big-box" stores, etc.--essentially, the backbone of the entire economies of all the richest countries in the world)
  • Burgeoning personal debt through credit cards and rising housing prices


There are also political implications to "peak oil." In 1976 William Ophuls published "Ecology and the Politics of Scarcity." In this book, he posits that as the primary governmental systems of the Western world evolved during the 1700s thru the 1900s, these systems experienced (and have come to assume) great natural abundance. Our governmental systems further assume (and depend upon) unlimited growth, and virtually unlimited natural resources, including oil and natural gas. The word "scarcity" is not welcome in contemporary political discourse. This fact hinders the ability of government to consider and mitigate the looming social and political problems associated with "peak oil."

Alternatives to conventional oil

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Alternatives to oil are energy sources other than oil which can be used instead of oil and natural gas in one or more applications, including; as a prime energy source, as a transportation fuel and as an ingredient in plastics and pesticides. When conventional oil enters depletion these alternative energy options may be increasingly relied upon to meet the world's energy needs.

Current Events pertaining to oil reserves

Main article: Oil price increases of 2004 and 2005

In late 2005 as oil prices rise, greater attention is focused on Hubbert's theory and its potential implications. However, oil and gas prices are notoriously volatile and price increases have been caused by numerous other factors, though there is a general agreement that increased demand, especially from China, has been the major factor, with such increased demand bringing the Hubbert peak closer than would have been predicted otherwise. In June 2005, OPEC admitted that they would 'struggle' to pump enough oil to meet pricing pressures for the fourth quarter of the year. It is predicted that the summer and winter of 2005 will bring oil prices to a new high. This may be a sign of increasing demand starting to outstrip supply or it may just be that the various geopolitical forces in the regions where oil is produced are limiting demand. One other explanation for the rising oil prices is that it is a sign of too much paper money and not too little oil. In this view, dramatically higher prices of all commodities and real estate indicates rising inflation.

Critique

The implications of the model are controversial. Some petroleum economists, such as Michael Lynch, argue [6] that the Hubbert curve with a sharp peak is inapplicable globally due to the differences in oil reserves, political and military leverage, demand, and trade partnerships between countries and regions.

Critics such as Leonardo Maugeri point out that Hubbert peak supporters such as Campbell previously predicted a peak in global oil production in both 1989 and 1995, based on oil production data available at that time. Maugeri claims that nearly all of the estimates do not take into account non-conventional oil even though the availability of these resources is (supposedly) huge and the costs of extraction, while still very high, are falling due to improved technology. Furthermore, he notes that the recovery rate from existing world oil fields has increased from about 22% in 1980 to 35% today due to new technology and predicts this trend will continue. According to Maugeri, the ratio between proven oil reserves and current production has constantly improved, passing from 20 years in 1948 to 35 years in 1972 and reaching about 40 years in 2003. Also according to Maugeri, these improvements occurred even with, according to him, low investment in new exploration and upgrading technology due to the low oil prices during the last 20 years. The current higher oil prices may well cause increased investment (Maugeri, 2004).

The current debate revolves around energy policy, and whether to shift funding to increasing fuel efficiency, and alternative energy sources like solar and nuclear power. Campbell's critics, like Michael Lynch, argue that his research data is sloppy. They point to the date of the coming peak, which was initially projected to occur by 2000, but has now been pushed back to 2010. However, Campbell and his supporters insist that when the peak occurs is not as important as the realization that the peak is coming. His most vocal critic has been Freddy Hutter. Throughout 2001-2003, in his monthly newsletters, Campbell maintained that his 1996 prediction of a peak in 2000 was unchallenged, despite Hutter's alerts of increasing production levels. Finally in his April 2004 Newsletter, Campbell relented and shifted the peak to 2010. Later this was brought forward to 2007 but in October 2005, was shifted back to 2010. These shifts between predicted dates occur because of the systemic lack of accurate oil reserve data--with no truly accurate data we will not know when the peak occurs. Only after the peak is reached will we know for sure (and this could be years afterwards -- indeed, the peak may already have occurred).

Another controversy was the status of the Hubbert Peak of conventional oil. Hutter claimed throughout 2004 that Campbell's own data illustrated that the Peak had passed unceremoniously in the Spring of 2004. The ASPO Newsletter continued to show the extraction peak in 2005 and/or 2006. Finally in August of 2005, Campbell again relented and began publishing that indeed the Peak had passed in 2004.

See also

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Prediction

Economics

Technology

References

Voices

Informed

Critics

Books

  • Ahmed Rashid, Jihad: The Rise of Militant Islam in Central Asia, 2003
  • Ahmed Rashid, Taliban: Militant Islam, Oil and Fundamentalism in Central Asia, 2001
  • Amory B. Lovins, Winning the Oil Endgame : Innovation for Profit, Jobs and Security, 2005
  • Andrew McKillop, The Final Energy Crisis, 2005
  • Colin J. Campbell, Oil Crisis, 2005
  • Colin J. Campbell, The Coming Oil Crisis, 2004
  • Colin J. Campbell, The Essence of Oil & Gas Depletion, 2004
  • Colin Mason, The 2030 Spike: Countdown to Global Catastrophe, 2003
  • Dale Allen Pfeiffer, The End Of The Oil Age, 2004
  • David Goodstein, Out of Gas: The End of the Age Of Oil, 2005
  • F. William Engdahl, A Century Of War : Anglo-American Oil Politics and the New World Order, 2004
  • James Howard Kunstler, The Long Emergency: Surviving the End of the Oil Age, Climate Change, and Other Converging Catastrophes, 2005
  • Julian Darley, High Noon For Natural Gas: The New Energy Crisis, 2004
  • Julian Darley, Relocalize Now! : Getting Ready for Climate Change and the End of Cheap Oil, 2005
  • Kenneth S. Deffeyes, Beyond Oil : The View from Hubbert's Peak, 2005
  • Kenneth S. Deffeyes, Hubbert's Peak : The Impending World Oil Shortage, 2001
  • Lutz C. Kleveman, The New Great Game : Blood and Oil in Central Asia, 2004
  • Matthew R. Simmons, Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy, 2005
  • Matthew Yeomans, Oil: A Concise Guide to the Most Important Product on Earth, 2006
  • Matthew Yeomans, Oil: Anatomy of an Industry, 2004
  • Michael Economides, The Color of Oil : The History, the Money and the Politics of the World's Biggest Business, 2000
  • Michael Ruppert, Crossing the Rubicon: The Decline of the American Empire at the End of the Age of Oil, 2004
  • Michael T. Klare, Blood and Oil : The Dangers and Consequences of America's Growing Dependency on Imported Petroleum, 2004
  • Michael T. Klare, Resource Wars: The New Landscape of Global Conflict, 2002
  • Paul Roberts, The End of Oil : On the Edge of a Perilous New World, 2004
  • Richard Heinberg, Powerdown : Options and Actions for a Post-Carbon World, 2004
  • Richard Heinberg, The Party's Over : Oil, War and the Fate of Industrial Societies, 2005
  • Ronald R. Cooke, Oil, Jihad and Destiny: Will Declining Oil Production Plunge Our Planet into a Depression?, 2004
  • Ross Gelbspan, Boiling Point: How Politicians, Big Oil and Coal, Journalists and Activists Are Fueling the Climate Crisis, 2004
  • Sonia Shah, Crude : The Story of Oil, 2004
  • Stephen Leeb, The Coming Economic Collapse : How You Can Thrive When Oil Costs $200 a Barrel, 2006
  • Stephen Leeb, The Oil Factor: How Oil Controls the Economy and Your Financial Future, 2005
  • Vaclav Smil, Energy at the Crossroads : Global Perspectives and Uncertainties, 2005


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