What is Peak Oil?What is Peak Oil?

M. King HubbertM. King Hubbert

In 1956 M. King Hubbert, a geologist for Shell Oil, predicted the peaking of US In 1956 M. King Hubbert, a geologist for Shell Oil, predicted the peaking of US Oil production would occur in the late 1960's. Oil production would occur in the late 1960's.

Although derided by most in the industry he was correct. He was the first to Although derided by most in the industry he was correct. He was the first to assert that oil discovery, and therefore production, would follow a bell shaped assert that oil discovery, and therefore production, would follow a bell shaped curve over its life. After his success in forecasting the US peak, this analysis curve over its life. After his success in forecasting the US peak, this analysis became known as the Hubbert's Peak.became known as the Hubbert's Peak.

The amount of oil The amount of oil discovereddiscovered in the US has dropped since the late 1930s. in the US has dropped since the late 1930s. 40 years later, US oil 40 years later, US oil productionproduction had peaked, and has fallen ever since. had peaked, and has fallen ever since.

WorldWorld discovery of oil peaked in the 1960s, and has declined since then. If the 40 discovery of oil peaked in the 1960s, and has declined since then. If the 40 year cycle seen in the US holds true for world oil production, that puts global year cycle seen in the US holds true for world oil production, that puts global peak oil production, right about now; after which oil becomes less available, and peak oil production, right about now; after which oil becomes less available, and more expensive.more expensive.

If we apply Hubbert's Peak to world oil production we estimate that If we apply Hubbert's Peak to world oil production we estimate that approximately half of all oil that will be recovered, has been recovered, and oil approximately half of all oil that will be recovered, has been recovered, and oil production may reach a peak in the near future, production may reach a peak in the near future, or perhaps already hasor perhaps already has..

The End of Oil?The End of Oil?

Peak Oil is Peak Oil is NOTNOT about about “running out of oil”“running out of oil”

Peak oil contends that any finite resource, Peak oil contends that any finite resource, (including oil), will have a beginning, (including oil), will have a beginning, middle, and an end of production, and at middle, and an end of production, and at some point it will reach a level of some point it will reach a level of maximum output.maximum output.

Oil becomes more difficult and expensive Oil becomes more difficult and expensive to extract as a field ages past the mid-to extract as a field ages past the mid-point of its life. point of its life. With some exceptions, this holds true for With some exceptions, this holds true for a single well, a whole field, an entire a single well, a whole field, an entire region, and presumably the world. region, and presumably the world.

Peak Oil means the end of Peak Oil means the end of cheapcheap oil. oil.

Dr. Richard SmalleyDr. Richard Smalley

December 15, 2004December 15, 2004

““...the most critical problem facing the world ...the most critical problem facing the world today is energy and finding new sources to today is energy and finding new sources to support a population of 10 billion by 2050. Our support a population of 10 billion by 2050. Our present population of 6.5bn consumes about present population of 6.5bn consumes about 14.5 Terawatts of energy, which is equivalent to 14.5 Terawatts of energy, which is equivalent to 220m barrels of oil per day. By 2050 this could 220m barrels of oil per day. By 2050 this could rise to as much as 50 Terawatts yet “the world is rise to as much as 50 Terawatts yet “the world is likely to pass through its maximum point of oil likely to pass through its maximum point of oil production in a matter of weeks.”production in a matter of weeks.”

““Oil may simply be the best energy source man Oil may simply be the best energy source man will ever discover.”will ever discover.”

Peak Oil is NOT a TheoryPeak Oil is NOT a Theory...it's a fact....it's a fact.

The Question is... when?

PredictionsPredictions

The Central IssueThe Central Issue

The GapThe Gap

DepletionDepletion

Rapid Depletion Rapid Depletion

● How fast will oil production decline post-How fast will oil production decline post-peak?peak? Historic data from oil wells shows an average Historic data from oil wells shows an average

depletion rate of around 3% - 4% per year. depletion rate of around 3% - 4% per year. But will today’s modern wells have a similar But will today’s modern wells have a similar

depletion rate to historic models? depletion rate to historic models?

● Maximum Recovery ExtractionMaximum Recovery Extraction The price of maximum extraction however, is The price of maximum extraction however, is

maximum decline rate after peak. maximum decline rate after peak. terminal decline in one or more of these fields would terminal decline in one or more of these fields would

be devastating to the oil market practically be devastating to the oil market practically overnight. overnight.

Common SenseCommon Sense

Rapid DepletionRapid Depletion

Rapid DepletionRapid Depletion

Campbell and LaherrèreCampbell and Laherrère

● "About 80 percent of the oil produced today flows "About 80 percent of the oil produced today flows from fields that were found beforefrom fields that were found before 1973, and the 1973, and the great majority of these are declining."great majority of these are declining."

BP StatBP Stat

World Oil ConsumptionWorld Oil Consumption

What effects will a decline in What effects will a decline in oil production have?oil production have?

● At $2.30 per gallon as I compose this, I’m confident I At $2.30 per gallon as I compose this, I’m confident I don’t need to explain why higher oil prices are important don’t need to explain why higher oil prices are important to anyone. Just go get gas & you’ll know.to anyone. Just go get gas & you’ll know.

● If peak oil is truly immanent, then economic instability is If peak oil is truly immanent, then economic instability is a certainty.a certainty.

● If decline rates resemble recent rapid depletion examples, If decline rates resemble recent rapid depletion examples, oil’s price will rise well beyond historic high prices.oil’s price will rise well beyond historic high prices.

● If more than one of the super giant fields enters an If more than one of the super giant fields enters an aggressive decline…aggressive decline…

● It will be cheaper to run your car on gold bars than It will be cheaper to run your car on gold bars than gasoline.gasoline.

Lead TimeLead Time

The actual date of peak oil The actual date of peak oil isn't important, what counts is isn't important, what counts is the date the date precedingpreceding the peak, the peak, after which it becomes more after which it becomes more difficult to avoid the worst difficult to avoid the worst consequences of depletion.consequences of depletion.

GAOGAO““Such a peak would require sharp Such a peak would require sharp reductions in oil consumption, reductions in oil consumption, and the competition for and the competition for increasingly scarce energy would increasingly scarce energy would drive up prices, possibly to drive up prices, possibly to unprecedented levels, causing unprecedented levels, causing severe economic damage. While severe economic damage. While these consequences would be felt these consequences would be felt globally, the United States, as the globally, the United States, as the largest consumer of oil and one largest consumer of oil and one of the nations most heavily of the nations most heavily dependent on oil for dependent on oil for transportation, may be especially transportation, may be especially vulnerable among the vulnerable among the industrialized nations of the industrialized nations of the world.”world.”

Feb 2007Feb 2007

ImpactImpact

1974 OPEC Oil Embargo 1974 OPEC Oil Embargo WWII US Oil Embargo WWII US Oil Embargo