DEFINITION of Hubbert's Peak Theory
Hubbert’s peak theory is the idea that because oil production follows a bell-shaped curve, global crude oil production will eventually peak and then go into terminal decline. Although this model can be applied to many resources, it was developed as a model for oil production.
BREAKING DOWN Hubbert's Peak Theory
Hubbert' peak theory is based on the work of Marion King Hubbert, a geologist working for Shell in the 1950s. It implies that maximum production from individual or global oil reserves will occur towards the middle of the reserve’s life cycle — according to the Hubbert curve, which is used by exploration and production companies to estimate future production rates. After that, production decline accelerates due to resource depletion and diminishing returns. Accordingly, if new reserves are not brought online faster than extractable reserves are drawn down, the world will eventually reach peak oil — because there is a finite amount of conventional light, sweet crude in the earth’s crust.
A Technological Revolution in Oil Production
But Hubbert’s predictions that U.S. oil production would peak in the 1970s, and that the world would hit peak oil around the year 2000, were proven wrong, because a technological revolution in the oil business has increased recoverable reserves, as well as boosting recovery rates from new and old wells.
Thanks to high-tech digital oil exploration using 3D seismic imaging that enables scientists to see miles below the seabed floor, proven reserves around the world are growing all the time, as new oil fields are discovered. Offshore drilling in the 1950s could reach a depth of 5,000 feet. Today it is 25,000 feet.
The U.S. exceeded its former 1972 peak of 10.2 million barrels per day in January 2018, thanks to innovations like hydraulic fracturing, enhanced oil recovery and horizontal drilling. This has added trillions of cubic feet of gas and billions of barrels of oil to America’s recoverable reserves, and turned it into a net exporter of petroleum products.
No More Peak Oil
The oil industry no longer talks about running out of oil, thanks to companies like Schlumberger. For the foreseeable future, there are almost unlimited quantities of oil. Technically, recoverable oil is estimated to be around 2.6 trillion barrels and rising, because most of the world has yet to be explored using the latest technologies.
Nor are we anywhere close to peak energy. There are an estimated 1.1 trillion tonnes of proven coal reserves worldwide — enough to last around 150 years at current rates of production. There are 205.34 trillion cubic meters of proven natural gas reserves — enough to last at least 50 years. And there may be 3,000 billion tonnes of methane hydrates — which is enough natural gas to fuel the world for a thousand years, according to the U.S. Geological and Geophysical Service.