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Hubbert peak theory

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File:Hubbert-fig-20.png
The Hubbert curve, devised by M. King Hubbert, is a model of future oil availability.
2004 U.S. government predictions for oil production other than in OPEC and the former Soviet Union

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

United States oil production peaked in 1971 [2]. (However, massive reserves in Alaska, off California, and in the Gulf are unused for political reasons.) The peak of world oilfield discoveries occurred in 1962 [3]. Some estimates for the date of worldwide peak in oil production, made by Hubbert and others, have already passed. This has led to criticism of the theory's method and predictions. Supporters of peak theory suggest Hubbert's model did not account for the 1973 and 1979 OPEC oil shocks, which effectively reduced demand, thus delaying a world peak.

The theory is subject to continued discussion and controversy. 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? [4] ad campaign, seeking to inform the public to the possibility of petroleum 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, ..."

Opinions on 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.

Hubbert's theory

Hubbert, a geophysicist, created a mathematical model of oil extraction which predicted that the cumulative amount of oil extracted over time would follow a logistic curve, which follows a bell-shaped pattern now known as the Hubbert curve. The theory implies that the predicted rate of oil extraction at any given time would be given by the derivative of the logistic curve at that time.

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, it is no longer worthwhile to extract petroleum for energy, and the field might be abandoned. According to Hubbert's model, oil reserves in the United States would be exhausted before the end of the 21st century.

Given past oil production data, and barring extraneous factors such as lack of demand, the model predicts the date of peak oil production output for an oil field, multiple oil fields, or an entire region. 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.

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 depleted.

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 (i.e., can be used as a base building material for chemicals and materials), 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.

Implications of a world peak

Main article: Implications of peak oil
Oil depletion scenarios

A global decline in oil production will have serious social and economic implications without due preparation. Global economic growth relies on cheap energy, and oil contributes significantly to the worldwide energy pool, particularly for transportation. A decline in energy supply would likely slow, if not reverse, growth.

Initially a peak in oil production would manifest itself as rapidly escalating prices and a 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. 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 relatively minor problems thanks to new technologies. In order to deal with problems from 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 the financial and investment world that "peak oil" (and natural gas) is a real phenomenon, and is either imminent or has already occurred. Significant indications of economic volatility have manifested themselves in the largest increase in inflation rates in 15 years (Sept. 2005), due mostly to higher energy costs. Since natural gas is the single largest feedstock used to produce fertilizers, an increase in natural gas prices could provide upward pressure on food costs, in addition to the increase in the transportation component of food prices.

However, these likely cumulative impacts of peaking oil, exacerbated by global competition over scarce remaining oil supplies, have led many analysts to predict dire consequences for conventional oil-dependent economies. According to oil industry analyst Jan Lundberg, "Based on today's intensifying trends, warning signs and an understanding of history, one must be ready to see the fossil-fueled phase come to an end most abruptly. When common practices cannot be maintained and too many people suddenly begin hoarding scant supplies, the desired resource dries up. This causes ramifications that quickly compound whatever triggered the crisis." This scenario is referred to by Lundberg as Petrocollapse.

Peak prediction

File:ASPO 2004.png
The organization ASPO predicts that oil production will peak around 2010.
The Energy Information Administration predicts no peak in consumption before at least 2025. Source: International Energy Outlook 2004. The International Energy Agency makes a similar projection

Since the global petroleum supply is finite, 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 dependent on the validity of the model and further to that, by the accuracy of the input data. If variables such as consumption are estimated incorrectly, then the formula will yield different 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. 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 (mbd) 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 [5] that there are enough petroleum reserves to continue current production rates for 50 to 100 years. 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."[6] Campbell argues that the USGS estimates are methodologically flawed (although he himself has admitted that he doesn't understand their methodology). 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.

According to the Energy Information Administration of the United States Department of Energy, international reserve "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[7]).

Professor Kenneth Deffeyes, author of "Hubbert's Peak" (ISBN 0691116253) and "Beyond Oil" (ISBN 0809029561), asserts that the peak was passed on Dec 16, 2005 [8]. He also asserts that the total of world oil is 2.013 Trillion Barrels.

Has it happened already?

A 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. Another peak oil proponent Kenneth S. Deffeyes predicted in his book Beyond Oil - The View From Hubbert's Peak that global oil production would hit a peak on Thanksgiving Day 2005 (Deffeyes has since revised his claim, and now argues that world oil production peaked on December 16 2005[9]). After Hurricane Katrina, Saudi Arabia claimed that it simply could not increase production to make up for the loss of Gulf of Mexico oil rigs shutdown. Furthermore, in April, 2006, a Saudi Aramco spokesman admitted that its mature fields are now declining at a rate of 8% per year, and its composite decline rate of producing fields is about 2%[10], implying that Saudi Arabia has probably peaked.

Nor is the crisis restricted to petroleum. 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 may have peaked on the North American continent in 2003, with the possible exception of Alaskan gas supplies which cannot be developed until a pipeline is constructed. Natural gas production in the North Sea has 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 energy returned on energy invested will be much lower than traditional gas sources, which inevitably leads to higher costs to consumers of natural gas.

There are some countries that have already passed their oil production peak.

Cultural awareness

File:Peakoil.jpg
Peak Oil on a license plate of a hybrid car driving past a windmill

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.


Alternative sources for petroleum

Main article: Alternative fuel

Alternatives are energy sources other than conventional oil and natural gas which can be used instead in one or more applications, including; as a prime energy source to generate electricity, as a transportation fuel, for space heating, as an ingredient in plastics, pesticides, pharmaceuticals, semiconductors, and fertilizers, and as a lubricant in industrial machinery and manufacturing. Alternatives include tar sands, oil shale, and coal liquefaction and gasification.

Syngas, created via coal liquefaction, requires no engine modifications for use in standard automobiles. As a byproduct of oil embargos during Apartheid in South Africa, Sasol, using the Fischer-Tropsch process, developed relatively low-cost coal-based fuel. Currently, over 50% of fuel used by automobiles in South Africa is produced from coal. With crude-oil prices currently around $75 per barrel, this process is now cost-effective.

Depending on when global oil production peaks, these alternatives may not yet be commercially available or scalable to replace conventional oil. To gain time to develop these alternatives as well as renewables and nuclear energy (fission or fusion)--conservation and improved efficiency are seen as the easiest courses of action to deal with rising prices of oil and natural gas.

Current events pertaining to oil production

Main article: Oil price increases of 2004 and later.

In late 2005 as oil prices rose, greater attention was focused on Hubbert's theory and its potential implications. While Hubbert himself is still not widely known, debates and discussions about the energy crisis have become commonplace in the media and elsewhere almost everywhere in the world. 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 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 that year. The summer and winter of 2005 brought oil prices to a new high. This may be a sign of increasing demand having started to outstrip supply or it may just be that the various geopolitical forces in the regions where oil is produced are limiting the available supply. One other explanation for the rising oil prices is that it has been 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.

The Burgan Field, Kuwait's largest oil field, peaked in November 2005. In March 2006, Fernado Canales, the Energy Secretary of Mexico, announced that Mexico's giant Cantarell Field peaked in 2005 though a fresh discovery in the same month has been described as perhaps containing 10GB of heavy crude. These two oil fields are among the largest in the world. Only Saudi Arabia's Ghawar is larger

Critique

The implications of the model are controversial. Some petroleum economists, such as Michael Lynch, argue [11] 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. 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. These improvements occurred even with low investment in new exploration and upgrading technology due to the low oil prices during the last 20 years.

More generally, the supply of oil may be somewhat elastic in both the short term and the long term. Higher prices may encourage greater production and the use of more expensive extraction approaches. Over time, the current higher oil prices may well cause increased investment. However, absent added reserves or alternative sources, this may only delay the peak, rather than eliminating the peak altogether, and accelerate the depletion of reserves.

Proponents of "abiotic oil" are also skeptical of statistical analyses containing, as a given, "fossil" origin theories of petroleum.

Part of 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. However, it should be noted that these two energy sources are not replacements for liquid fuels. 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.

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.

Further, the "gloom and doom" scenarios constructed by peak oil proponents are said to fail to consider the proven feasability of backstop technologies such as ethanol-based fuels, coal liquefaction, and other substitutes for crude oil. Coal liquefaction in particular becomes economically reasonable, according to some estimates, at an oil price of $35/barrel - a price only slightly more than half the market price as of March 2006. Peak oil proponents point out that such technologies are less efficient and claim that they will not be sufficient to replace declining supplies of oil.

See also

Global fossil carbon emissions, an indicator of consumption, for 1800-2000. Total is black. Oil is in blue.

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 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
  • Peter Tertzakian, "A Thousand Barrels a Second," 2006, McGraw-Hill
  • 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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