Oil, like other resources, are not infinite and as more extraction of oil is done all over the world, there are also more theories that analyze the rise, peaks, falls and depletion of oil in different moments in time. There is even a theory, developed by M.King Hubbert’s studies, that oil will not only deplete, which means that there is a fall in the reserves and supply, but that it will peak, which is that it will reach its maximum production level. Even the OPEC, the Organization of the Petroleum Exporting Countries, has acknowledged that this peak could be reached in a little under a decade. OPEC is the largest intergovernmental organization, including over 13 nations that coordinates and unifies the policies that refer to petroleum with all its members to ensure that the market is continuously stabilized since 1960. You can read more about the history of OPEC on the Suzzanne Uhland Blog, to understand better how this organization was formed and the nations that take part in it.
When the peak on oil comes around it is predicted that the global impact on the economy will be that of decline and oil price increase. There is an extremely high dependency in the modern world for oil in transport, agriculture and industrial systems that depend on the low cost and availability of oil to succeed in their segments. As to the specific negative effects, these vary quite a lot, but they do all agree that the impact will spread all over and affect costs of other products in consequence. The forecasts are usually set up with two scenarios, one where there is higher production, which is quite optimistic, and the other is with lower production, being on the other extreme and analyzing the scenario while being very pessimistic on the market conditions. The scope then ranges from peak production reaching in 2020, in the optimistic scenario, to as early as 2007, in the pessimistic scenario, which states we have already reached the peak or that it will occur shortly. The original prediction by Hubbert, based on the studies at the time, was that the peak would be reached in 1970. It is said that oil was able to bounce back due to the successful implementation of hydraulic fracturing and tight reservoirs, besides the fact that other theorists have later come stating that this original prediction was in fact premature.
The possible consequences to peak oil would be initially the obvious one, which is the increase of oil prices all over the world. In turn, this would affect any industry or person who requires oil to do their job, such as agriculture. It will inevitably have long-term effects on our current lifestyle as most people around the world rely on automobiles that run on petroleum and some live in rural areas which make having an automobile a necessity. This would begin to change the notion to living in a place where you could find alternative transportation options like walking, public transportation or biking. Commuting will need to be reduced as much as possible, or the possibility of fueling cars with alternative energy. The increase in oil prices will also have a direct impact on the cost of food, heating, and electricity. One of the ways to prepare for what’s to come is to have non-petroleum vehicles available like electric cars, battery electric vehicles, or new trains. This will also require Smart growth, which is a theory that states that urban planning can create epicenters in urban locations that avoid the widespread of a city, but instead a compact and walkable urban area. Now, there are those who also see positive aspects to this peak, especially for countries that prepare for it in advanced. Cities and countries that take it upon themselves to rebuild food networks, energy production, and other affected areas, will move towards a transitional era that will not only allow them to be prepared, but will create a lower footprint on the planet that will be seen in the long run.
For 2017, it has been predicted by Charles Maxwell, a well-recognized and respected oil analyst, which stated that even though the ballpark figure was that the peak would be reached between 2015 and 2020, he would pick the year 2017 or 2018 to be more specific. He notified that this would mean that the oil industry would reach a plateau that would sustain itself for four to five years and then slowly begin to decrease. By 2020, he says that the impact will be clear starting with signs like a financial crisis which lasts 10 or 12 years and is started by the oil industry. This was reported in 2010, and now in 2017, it is evident that demand has been exceeded by supply only mildly. It’s said that in 2017 oil prices will rise and that the annual global oil consumption will exceed production, event which hasn’t occurred since 2013. Only time will tell and the market will determine if Maxwell’s prediction was accurate.