American geophysicist Marion King Hubbert first presented what has come to be known as “Hubbert’s Peak” in 1956.
He theorized that because oil is a finite resource, once world production reaches its maximum limit it will begin to fall into terminal decline. He also theorized that the oil age, in the context of human history, would be relatively short.
Using data from his studies of how production at individual oil wells and oil fields follows a predictable depletion curve, Hubbert predicted that peak oil production in the United States would occur around 1970.
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It did, falling gradually from 10 million barrels a day to the current level of slightly more than four million.
Some argue that the world’s oil is already half gone, while others say that more than two-thirds is still in the ground and can be extracted using new technology.
Canadian geologist David Hughes has collected some 20 published estimates of the date of a global peak, which range from 2005 to 2040. In between those two extremes lies a variety of opinions, with the average being 2014, he said.
“It depends on what happens to the world economy, how fast does demand grow, and whether we’re going to get lucky,” he said.
New oil resources must be developed to replace declining production from existing oilfields, which falls at a rate of two to four percent a year.
At the same time, daily global consumption that now stands at roughly 85 million barrels per day is increasing by about 1.5 million barrels per day annually.
The oil to replace depleted fields and meet new demand comes from places that are deeper, harder to reach and more costly to extract, often in politically unstable places.
“Why are we drilling $750 million wells in the Gulf of Mexico in 7,000 feet of water if there is an easier place to look? Globally, at some point, depletion is going to catch up on us.”
When Saudi Arabia’s Ghawar oil field – the world’s largest – was first tapped in 1951, it produced 20,000 barrels per day under natural reservoir pressure.
In the 1970s, it was estimated to contain 170 billion barrels. Since then it has produced 60 billion barrels. Current production is estimated at five million barrels per day, almost five percent of world oil production.
Analysts say that when Ghawar starts to run dry, OPEC’s capacity to regulate prices by opening its taps will be gone.
“In the U.S., average production from stripper wells is five barrels a day,” Hughes said.
“Where are the places to look for another Ghawar in the world? We’ve done a fairly good job of scouring the world, maybe with the exception of the Arctic.”
What about Alberta’s tar sands, said to contain 174 billion barrels?
“The question is: how fast can you convert it to supply?” he said, adding that huge amounts of investment, water and natural gas would be needed to take up the slack should output in other areas fall.
Hughes said arriving at peak probably won’t mean oil production will grind to a halt, sending oil prices through the roof and the world economy into a tailspin.
“It will more likely be a bumpy plateau,” he said.
“If the price spikes, that will encourage demand reduction, which will buy us some time.”
An intelligent rethink of the way we consume energy is urgently needed, he added.
“The biggest and cheapest oilfield in the world is conservation. The beauty of that is there is a lot of low hanging fruit, particularly in North America.”
