DEFINITION of 'Hubbert Peak Theory'
Similar to the predictions of the Hubbert Curve, the Hubbert Peak Theory implies that maximum production from an oil reserve will occur towards the middle of the reserve life cycle.
The theory suggests the production rate from a region follows a bell shaped pattern. The region can be a country or just a certain oilfield.
BREAKING DOWN 'Hubbert Peak Theory'
Although the Hubbert Peak Theory has been most discussed in reference to the oil industry, the theory is also applicable to natural gas, coal, transition metals, precious metals and even water.
Prior to natural resource extraction, a firm will often estimate the expected Hubbert Curve to gain insight into future production rates.