Nowadays, there is a huge turmoil related to oil production in the world. The market has gone crazy, the OPEC is taking measures to help the oil prices go up, and there is a general feeling of uncertainty related to what may happen in the near future with oil.
As we have seen, thanks to this situation, many terms and words pop up and most mortals don’t actually know what they mean. There is one term, especially that is worth being analyzed and explained thanks to the impact it may have in the way the oil world operates. That term is “oil peak”.
Defining Oil Peak
In rough, oil peak is a term first coined by the geologist M. King Hubbert that aims to point the exact moment in time when the highest rate of oil extraction is reached. After reaching this peak, the rate of petroleum extraction is supposed to go down slowly, also affecting the production of oil over time.
This theory is based on the behavior of oil extraction in time (the way it rises, reaches a peak, falls and depletes its production rates). Also, it states that after the peak is reached, there is only one way to keep on moving and it is the way down. Therefore, production will never increase after that moment and will be doomed to disappear over time eventually.
It is important to notice that there is a global oil peak and at the same time each nation holds its own statistics on oil peak as well. Also, these numbers are presented regardless what their cause may be. In other words, a country may reach its oil peak due to geological or economic causes and these causes are actually irrelevant once the peak has been already reached. However, a country may reach the peak thanks to the combination of these two variables.
Oil peak is represented graphically by a curve with the shape of a bell. This way, they graph will show the highest point of the bell as the oil peak, the ascendant part of the curve as the remaining time for extraction and the descending part of the curve as the time left for mankind to consume the resource. It is also important to notice that when the production peak takes place, half of the remaining oil has already been extracted.
The way the oil peak is graphically represented remains the same for most countries, and it is actually evolving in a very similar way among all nations in the world. This is happening presumably because conditions related to the extraction of petroleum are changing in the same way for every country. This means that all oil peak graphics will show similar conditions given the fact that most countries are experiencing issues with the extraction of oil as it is becoming harder and more expensive to do so.
Oil Peak Forecast
Predictions regarding oil production and oil peak are always based on two perspectives: the optimistic and the pessimistic one. The optimistic says that oil production is higher, therefore, we are far away from setting the oil peak. On the other hand, the pessimistic perspective points out that production is actually at its lower right now, meaning that we are soon reaching the oil peak.
In this sense, it is also important to say that the optimistic scenario points out that the oil peak will be reached in another three years (2020), giving investors and companies the chance to develop alternatives to overcome a potential crisis related to oil production. This will require people to change their habits, the way the move, use transportation and basically understand life since most of our nations nowadays depend on oil.
Nevertheless, the most pessimistic scenario states that we have already reached the oil peak globally speaking. Actually, we reached it 10 years ago, and that is why currently the world is facing an oil crisis (among other political and economic reasons). This means that is oil peak extraction already took place, and we will shortly have to face oil peak related to production.
The geologist M. King Hubbert actually was able to claim almost 60 years ago that the United States had already reached its oil peak when its average production of oil barrels was at its highest. In the 1970’s Hubbert stated that oil extraction and production in the U.S would shortly start to decrease, even though the use of petroleum was about to become more popular among citizens and oil prices were going to rise.
It is important as well to notice that oil production in the US actually grew steadily until the 1970’s and after that started to decline, proving right Hubbert’s theory. This doesn’t mean that the US has actually struggled because it wasn’t able to maintain an always growing oil production. It simply means that production has declined and will keep on moving towards that direction until in time it will become unsustainable.
Hopefully, by the time things change, every country, including the US will be able to use alternative technologies that resemble the relationship we have today with oil.
Related: Facts You Didn’t Know About The OPEC Member Countries by Suzzanne Uhland
* Featured Image courtesy of Alex Gao at Flickr.com