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Peak oil
Articles in this series:
Peak oil
Mitigation of peak oil
Hubbert peak theory
Related articles

Further information: Oil depletion

Peak oil is the point or timeframe at which the maximum global petroleum production rate is reached, after which the rate of production enters its terminal decline. If global consumption is not mitigated before the peak, the availability of conventional oil will drop and prices will rise, perhaps dramatically. M. King Hubbert first used the theory in 1956 to accurately predict that United States oil production would peak between 1965 and 1970. His model, now called Hubbert peak theory, has since been used to predict the peak petroleum production of many other countries, and has also proved useful in other limited-resource production-domains. According to the Hubbert model, the production rate of a limited resource will follow a roughly symmetrical bell-shaped curve based on the limits of exploitability and market pressures.

Some observers, such as petroleum industry experts Kenneth S. Deffeyes and Matthew Simmons, believe the high dependence of most modern industrial transport, agricultural and industrial systems on the relative low cost and high availability of oil will cause the post-peak production decline and possible severe increases in the price of oil to have negative implications for the global economy. Although predictions as to what exactly these negative effects will be vary greatly, "a growing number of oil-industry chieftains are endorsing an idea long deemed fringe: The world is approaching a practical limit to the number of barrels of crude oil that can be pumped every day."^[1]

If political and economic change only occur in reaction to high prices and shortages rather than in reaction to the threat of a peak, then the degree of economic damage to importing countries will largely depend on how rapidly oil imports decline post-peak. The Export Land Model shows that the amount of oil available internationally drops much more quickly than production in exporting countries because the exporting countries maintain an internal growth in demand. Shortfalls in production (and therefore supply) would cause extreme price inflation, unless demand is mitigated with planned conservation measures and use of alternatives, which would need to be implemented 20 years before the peak.^[2]

Liberal estimations of peak production forecast a peak will happen in the 2020s or 2030s and assume major investments in alternatives will occur before a crisis. These models show the price of oil at first escalating and then retreating as other types of fuel and energy sources are used.^[3].

Conservative predictions of future oil production operate on the thesis that the peak has already occurred^[4][5][6][7] or will occur shortly^[8] and, as proactive mitigation may no longer be an option, predict a global depression, perhaps even initiating a chain reaction of the various feedback mechanisms in the global market which would stimulate a collapse of global industrial civilization.

Contents 1 Reserves 1.1 Concerns over stated reserves 1.2 Unconventional sources 2 Production 3 Demand 3.1 Population 3.1.1 Agriculture and population limits 4 Predictions and possible consequences of Peak Oil 4.1 The Hirsch Report 4.1.1 Conclusions from the Hirsch Report and three scenarios 4.2 Other predictions 4.2.1 Agricultural effects 4.2.2 Transportation and housing 4.3 Mitigation 5 Related peaks 6 Current events 6.1 Timing 6.2 Peak oil production—has it happened already? 6.2.1 Peak oil for individual nations 6.3 Resource nationalism 6.4 Oil price 6.5 US economy versus US government 7 Alternative views 7.1 Non-dramatic peak oil 7.2 Energy Information Administration and USGS 2000 reports 7.3 No Peak Oil 7.4 Abiogenesis 8 Historical understanding of world oil supply limits 9 See also 10 References 11 Further reading 11.1 Books 12 External links

Main articles: Oil reserves and Peak oil/Table of largest oil fields

“	All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas.	”
	— William J. Cummings, ExxonMobil's spokesman in Angola, Dec. 2005, [9]

As Peak oil is concerned with the amount oil produced over time, the amount of recoverable reserves is important as this determines the amount of oil that can potentially be extracted in the future.

Conventional crude oil reserves include all crude oil that is technically possible to produce from reservoirs through a well bore, using primary, secondary, improved, enhanced, or tertiary methods. This does not include liquids extracted from mined solids or gasses (tar sands, oil shales, gas-to-liquid processes, or coal-to-liquid processes).^[10]

Oil reserves are classified as proven, probable and possible. Proven reserves are generally intended to have at least 90% or 95% certainty of containing the amount specified. Probable Reserves have an intended probability of 50%, and the Possible Reserves an intended probability of 5% or 10%.^[11] Current technology is capable of extracting about 40% of the oil from most wells. Some speculate that future technology will make further extraction possible,^[12] but to some, this future technology is already considered in Proven and Probable reserve numbers.

In many major producing countries, the majority of reserves claims have not been subject to outside audit or examination. Most of the easy-to-extract oil has been found.^[9] Recent price increases have led to oil exploration in areas where extraction is much more expensive, such as in extremely deep wells, extreme downhole temperatures, and environmentally sensitive areas or where high-technology will be required to extract the oil. A lower rate of discoveries per explorations has led to a shortage of drilling rigs, increases in steel prices, and overall increases in costs due to complexity.^[13][14]

The peak of world oilfield discoveries occurred in 1965.^[15] Because of world population growth, oil production per capita peaked in 1979 (preceded by a plateau during the period of 1973-1979).^[16]

The amount of oil discovered each year also peaked during the 1960's at around 55 Gb/year, and has been falling steadily since (in 2004/2005 it was about 12 Gb/year). Reserves in effect peaked in 1980, when production first surpassed new discoveries, though creative methods of recalculating reserves has made this difficult to establish exactly^[6]

“	[World] reserves are confused and in fact inflated. Many of the so called reserves are in fact resources. They’re not delineated, they’re not accessible, they’re not available for production	”
	— Sadad Al-Husseini, former VP of Aramco, Oct. 2007; by Al-Husseini's estimate 300 billion of the world’s 1200 billion barrels of proved reserves should be recategorized as speculative resources. [7]

One difficulty in forecasting the date of peak oil is the opacity surrounding the oil reserves classified as 'proven'. Many worrying signs concerning the depletion of 'proven reserves' have emerged in recent years.^[17][18] This was best exemplified by the 2004 scandal surrounding the 'evaporation' of 20% of Shell's reserves.^[19]

For the most part, 'proven reserves' are stated by the oil companies, the producer states and the consumer states. All three have reasons to overstate their proven reserves:

• Oil companies may look to increase their potential worth.

• Producer countries are bestowed a stronger international stature

• Governments of consumer countries may seek a means to foster sentiments of security and stability within their economies and among consumers.

The Energy Watch Group (EWG) 2007 report shows total world Proved (P95) plus Probable (P50) reserves to be between 854 and 1255 Gb (30 to 40 years of supply if demand growth were to stop immediately). Major discrepancies arise from accuracy issues with OPEC's self-reported numbers. Besides the possibility that these nations have overstated their reserves for political reasons (during periods of no substantial discoveries), over 70 nations also follow a practice of not reducing their reserves to account for yearly production. 1255 Gb is therefore a best-case scenario.^[6] Analysts have suggested that each of the OPEC member nations also has economic incentives to exaggerate their reserves, due to the OPEC quota system, which allows greater output for countries with greater reserves.^[12]

The following table shows suspicious jumps in stated reserves without associated discoveries, as well as the lack of depletion despite yearly production:

Declared reserves with suspicious increases in bold purple (in billions of barrels) from Colin Campbell, SunWorld, 80'-95
Year	Abu Dhabi	Dubai	Iran	Iraq	Kuwait	Saudi Arabia	Venezuela
1980	28.00	1.40	58.00	31.00	65.40	163.35	17.87
1981	29.00	1.40	57.50	30.00	65.90	165.00	17.95
1982	30.60	1.27	57.00	29.70	64.48	164.60	20.30
1983	30.51	1.44	55.31	41.00	64.23	162.40	21.50
1984	30.40	1.44	51.00	43.00	63.90	166.00	24.85
1985	30.50	1.44	48.50	44.50	90.00	169.00	25.85
1986	31.00	1.40	47.88	44.11	89.77	168.80	25.59
1987	31.00	1.35	48.80	47.10	91.92	166.57	25.00
1988	92.21	4.00	92.85	100.00	91.92	166.98	56.30
1989	92.20	4.00	92.85	100.00	91.92	169.97	58.08
1990	92.20	4.00	93.00	100.00	95.00	258.00	59.00
1991	92.20	4.00	93.00	100.00	94.00	258.00	59.00
1992	92.20	4.00	93.00	100.00	94.00	258.00	62.70
2004	92.20	4.00	132.00	115.00	99.00	259.00	78.00

Kuwait, for example, was reported by a January 2006 issue of Petroleum Intelligence Weekly to have only 48 Gb in reserve, of which only 24 are "fully proven." This report was based on "leaks of confidential documents" from Kuwait, and has not been formally denied by the Kuwaiti authorities. Additionally, the reported 1.5 Gb of oil burned off by Iraqi soldiers in the first Gulf War^[20] are conspicuously missing from Kuwait's figures.

On the other hand investigative journalist Greg Palast has argued that oil companies have an interest in making oil look more rare than it is in order to justify higher prices.^[21] Other analysts in 2003 argued that oil producing countries understated the extent of their reserves in order to drive up the price of oil.^[22]

Main articles: Heavy crude oil, Tar sands, and Oil shale

Unconventional sources, such as heavy crude oil, tar sands, and oil shale are not counted as part of oil reserves. However, oil companies can book them as proven reserves after opening a strip mine or thermal facility for extraction. Oil industry sources such as Rigzone have stated that these unconventional sources are not as efficient to produce, however, requiring extra energy to refine, resulting in higher production costs and up to three times more greenhouse gas emissions per barrel (or barrel equivalent).^[23] While the energy used, resources needed, and environmental effects of extracting unconventional sources has traditionally been prohibitively high, the three major unconventional oil sources being considered for large scale production are the extra heavy oil in the Orinoco river of Venezuela,^[24] the tar sands in the Western Canada Basin,^[25] and the oil shale in the Green River Formation in Colorado, Utah and Wyoming in the United States.^[26][27] Chuck Masters of the USGS estimates that, "Taken together, these resource occurrences, in the Western Hemisphere, are approximately equal to the Identified Reserves of conventional crude oil accredited to the Middle East."^[28]

Despite the large quantities of oil available in non-conventional sources, Matthew Simmons argues that limitations on production prevent them from becoming an effective substitute for conventional crude oil. Simmons states that "these are high energy intensity projects that can never reach high volumes" to offset significant losses from other sources.^[29] Moreover, oil extracted from these sources typically contains contaminants such as sulfur, heavy metals and carbon that are energy-intensive to extract and leave highly toxic tailings. However, oil prices of over $90 a barrel in 2007 have brought increased attention to potentially mining these sources.^[12] The results of one study suggest that within 15 years all the world’s extra oil supply will likely come from unconventional sources.^[30]

A 2003 article in Discover magazine claimed that thermal depolymerization could be used to manufacture oil indefinitely, out of garbage, sewage, and agricultural waste. The article claimed that the cost of the process was $15 per barrel. ^[31] A follow-up article in 2006 stated that the cost was actually $80 per barrel. ^[32]

Main articles: Petroleum#Means of production and Extraction of petroleum

The time when peak production of oil occurs is the measure which defines Peak oil. This is because production capacity in effect dictates supply. Therefore, when production decreases, it becomes the main bottleneck to the petroleum supply/demand equation.

World wide oil production has surpassed annual discoveries since 1980.^[6] According to several sources^{[4][5][6][7][8]}, world-wide production is currently at or near its maximum.

World oil production growth trends, in the short term, have been flat over the last 18 months. Global production averaged 85.24 mbbl/d in 2006, up 0.76 mbbl/d (0.9%), from 84.48 mbbl/d in 2005.^[33] Production in Q3 2007 was 85.08 mbbl/d, down 0.62 mbbl/d (0.7%), from the same period a year earlier. Average yearly gains in world oil production from 1987 to 2005 were 1.2 mbbl/d (1.7%), with yearly gains since 1997 ranging from -1.4 mbbl/d, (-1.9%; 1998-1999) to 3.3 mbbl/d (4.1%; 2003-2004).^[33]

Of the largest 21 fields, about 9 are already in decline.^[34] Mexico announced that its giant Cantarell Field entered depletion in March, 2006,^[35] as did the huge Burgan field in Kuwait in November, 2005.^[36] Due to past overproduction, Cantarell is now declining rapidly, at a rate of 13% per year.^[37] In April, 2006, a Saudi Aramco spokesman admitted that its mature fields are now declining at a rate of 8% per year, and its composite decline rate of producing fields is about 2%.^[38] This information has been used to argue that Ghawar, the largest oil field in the world and a field responsible for approximately half of Saudi Arabia's oil production over the last 50 years, has peaked.^[39][12]

OPEC had vowed in 2000 to maintain a production level sufficient to keep oil prices between $22-28 a barrel, but this quickly proved impossible. In its 2007 annual report, OPEC projected that the price of oil would remain at around $50-60 per barrel until 2030.^[40] Then on November 18, 2007, with oil above $98 a barrel, King Abdullah of Saudi Arabia, a long time advocate of stabilized oil prices, announced that his country would not increase production in order to lower prices.^[41] Given Saudi Arabia's reversal and inability, as the worlds largest oil producer, to lower prices through increased production, it now appears that no nation or organization has the spare production capacity to lower oil prices, suggesting that those major suppliers who have not yet peaked are operating at or near full capacity.^[12]

Commentators have pointed to the Jack 2 deep water test well in the Gulf of Mexico, announced September 5, 2006,^[42] as evidence that there is no imminent peak in global oil production. According to one estimate, the field could account for up to 11% of U.S. production within seven years.^[43] However, even though oil discoveries are expected after the peak oil of production is reached,^[44] the new reserves of oil will be harder to find and extract. The Jack 2 field, for instance, is more than 20,000 feet under the sea floor in 7,000 feet of water, requiring 8.5 kilometers of pipe to reach.

The increasing investment in harder to reach oil is a sign of oil companies' belief in the end of easy oil.^[9]

Further information: Industrialization and Developing countries

The demand side of Peak oil is concerned with the consumption over time, and the growth of this demand. World crude oil demand has grown at around 2 percent in recent years. Demand growth is highest in the developing world. World demand for oil is set to increase 37% by 2030, according to the US-based Energy Information Administration's (EIA) annual report. Demand will hit 118 million barrels per day (bpd) from today's existing 86 million barrels, driven in large part by the transportation sector.^[45][46]

As countries develop, industry, rapid urbanization and higher living standards drive up energy use, most often of oil. Thriving economies such as China and India are quickly becoming large oil consumers. China has seen oil consumption grow by 8% yearly since 2002^[47], indicating a doubling rate of less than 10 years. It currently imports roughly half its oil, with predictions of swift continued growth in coming years. India's oil imports are expected to more than triple to some 5 million barrels a day by 2020.^[48]

Energy demand is distributed amongst four broad sectors: transportation, residential, commercial, and industrial.^[49][50]

The sector that generally sees the highest annual growth in petroleum demand is transportation, in the from of new demand for personal-use gas-powered vehicles.^[51] Cars and trucks will cause almost 75% of the increase in oil consumption by India and China between 2001 and 2025.^[52] As more countries develop, the demand for oil will increase further. This sector also has the highest consumption rates, accounting for approximately 67% of the oil used in the United States^[53], and 55% of oil use worldwide as documented in the Hirsch report. Transportation is therefore of particular interest to those seeking to mitigate the effects of Peak oil.

Further information: World population

Another large factor on petroleum demand has been human population growth. Oil production per capita peaked in the 1970s.^[16] The world’s population in 2030 is expected to be double that of 1980. Some analysts project that people will be much more oil-dependent than they are now^[54], while others predict that oil production in 2030 will have declined back to 1980 levels as worldwide demand for oil significantly out-paces production.^[55] Some physicists maintain that the long-falling rate of oil production per capita has gone undiscussed because mitigation may imply a politically incorrect form of population control.^[56]

One factor that has so far helped ameliorate the effect of population growth on demand is the decline of population growth rate since the 1970s. In 1970, the population grew at 2.1%. By 2006, it had declined to 1.1%^{[citation needed]}. From 2000 to 2005, human population only grew by 6.3%, whereas global oil production increased by 8.2%. ^[57]

Main articles: Agriculture and Peak oil#Agricultural effects

Supplies of oil and gas are essential to modern agriculture techniques,^[58] so coming decades could see spiraling food prices and unprecedented famine affecting human populations across the globe.^[59][60] Geologist Dale Allen Pfeiffer contends that current population levels are unsustainable. To achieve a sustainable economy and avert disaster, he maintains that the United States must reduce its population by at least one-third, and world population will have to be reduced by two-thirds^[61].

Further information: Malthusian catastrophe, Olduvai theory, and Backstop resources

The widespread and efficient use of fossil fuels has been one of the most important stimuli of Economic growth and prosperity since the industrial revolution, allowing humans to participate in takedown, or the consumption of energy at a greater rate than it is being replaced. Some believe that when oil production decreases, human culture and modern technological society will be forced to change drastically. The impact of Peak oil will depend heavily on the rate of decline and the development and adoption of effective alternatives. If alternatives are not forthcoming, the products produced with oil (including fertilizers, detergents, solvents, adhesives, and most plastics) would become scarce and expensive. At the very least this could lower living standards in developed and developing countries alike, and in the worst case lead to worldwide economic collapse. With increased tension between countries over dwindling oil supplies, political situations may change dramatically and inequalities between countries and regions may become exacerbated.

Main article: Hirsch report

In 2005, the US Department of Energy published a report titled Peaking of World Oil Production: Impacts, Mitigation, & Risk Management.^[62] Known as the Hirsch report, it stated, "The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented. Viable mitigation options exist on both the supply and demand sides, but to have substantial impact, they must be initiated more than a decade in advance of peaking."

• World oil peaking is going to happen, and will likely be abrupt.
• Oil peaking will adversely affect global economies, particularly those most dependent on oil.
• Oil peaking presents a unique challenge (“it will be abrupt and revolutionary”).
• The problem is liquid fuels (growth in demand mainly from the transportation sector).
• Mitigation efforts will require substantial time.
  • 20 years is required to transition without substantial impacts
  • A 10 year rush transition with moderate impacts is possible with extraordinary efforts from governments, industry, and consumers
  • Late initiation of mitigation may result in severe consequences.
• Both supply and demand will require attention.
• It is a matter of risk management (mitigating action must come before the peak).
• Government intervention will be required.
• Economic upheaval is not inevitable (“given enough lead-time, the problems are soluble with existing technologies.”)
• More information is needed to more precisely determine the peak time frame.

Possible Scenarios:

• Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades.

• Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked.

• Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period.

Some envisage a Malthusian catastrophe occurring as oil becomes increasingly inefficient to produce. Others claim that applying lessons learned from "mature oil fields" to operational procedures of other basins could preserve their operational tempo^{[citation needed]}.

Further information: Peak oil#Agriculture and population limits and Agriculture#Petroleum availability and agriculture

Since the 1940s, agriculture has dramatically increased its productivity, due largely to the use of petrochemical derived pesticides, fertilizers, and increased mechanization. This has allowed world population to grow more than double over the last 50 years. Every energy unit delivered in food grown using modern techniques requires over ten energy units to produce and deliver. Because of modern agriculture's heavy reliance on petrochemicals and mechanization, as well as the lack of any quickly available non-petroleum based alternatives, many agriculture, petroleum, sociology, and ecology experts have warned that the ever decreasing supply of oil will inflict major damage to the modern industrial agriculture system (a list of publications supporting this thesis can be found here in the section: "Food, Land, Water, and Population"), causing a collapse in food production ability and food shortages.

One example of this chain reaction is the effect of petroleum supplies on fertilizer production. By far the biggest fossil fuel input to agriculture is the use of natural gas as a hydrogen source for the Haber-Bosch fertilizer-creation process^{[citation needed]}. Natural gas is used because it is the cheapest currently available source of hydrogen^{[citation needed]}. When oil production becomes so scarce that natural gas is used as a partial stopgap replacement, and hydrogen use in transportation increases, natural gas will become much more expensive. If other sources of hydrogen are not available to replace the Haber process, in amounts sufficient to supply transportation and agricultural needs, this major source of fertilizer would either become extremely expensive or unavailable. This would either cause food shortages or dramatic rises in food prices.

One effect of oil shortages (and by far the most sustainable alternative) is a full return to organic agriculture methods. This conversion would take time, as well as major reconditioning of soil which now relies on chemical fertilizers to be produce enough food to meet demands. Also, while some farmers using modern organic-farming methods have reported yields as high as those available from conventional farming (but without the use of fossil-fuel-intensive artificial fertilizers or pesticides)^{[63][64][65][66]}, this may be more labor-intensive^{[citation needed]} and require a shift of work force from urban to rural areas.

Farmers have also begun raising crops such as corn for non-food use in an effort to help mitigate peak oil. This has already lowered food production^[67], an effect which will be exacerbated when demand for ethanol fuels rises. Rising food and fuel costs has already limited the abilities of some charitable donors to send food aid to starving populations.^[68] In the UN, some warn that the recent 60% rise in wheat prices could cause "serious social unrest in developing countries."^[69]

A majority of Americans live in suburbs, a type of low-density settlement designed around universal personal automobile use. Electric vehicle technology may extend the usefulness of these living arrangements, but commentators such as James Howard Kunstler argue that because over 90% of transportation in the United States relies on oil, the suburb's reliance on the automobile is an unsustainable living arrangement. Peak oil would leave many Americans unable to afford petroleum based fuel for their cars, and force them to move to higher density areas, where walking and public transportation are more viable options. Suburbia may become the "slums of the future." New Urbanism, a movement interested in dealing with this problem early, seeks to change suburbs into higher density neighborhoods with mixed-use forms for new building projects.

Main articles: Mitigation of peak oil, Energy conservation, Energy development, and Energy security

To avoid the serious social and economic implications a global decline in oil production could have, the Hirsch report emphasized the need to find alternatives at least 10-20 years before the peak, and to phase out the use of petroleum over that time, similar to the plan Sweden announced in 2005. Such mitigation could include energy conservation, fuel substitution, and the use of non-conventional oil. Because mitigation can reduce the consumption of traditional petroleum sources, it can also affect the timing of peak oil and the shape of the Hubbert curve.

The amount of oil discovered each year peaked in the mid 1960's at around 55 Gb/year, and has been falling steadily since then (in 2004/2005 it was about 12 Gb/year)^[15]. Reserves in effect peaked in 1980, when production first surpassed new discoveries. Because of world population growth, oil production per capita peaked in 1979 (preceded by a plateau during the period of 1973-1979).^[16]

Hubbert's curve has also been used to describe the peak production of other non-renewable resources, such as natural gas, coal, metals, and even renewable resources like water and fish.^[70]

The only reliable way to identify the timing of peak oil will be in retrospect. M. King Hubbert, who devised the peak theory, predicted in 1974 that peak oil would occur in 1995 at 12 gigabarrels per year "if current trends continue".^[71] However, in the late 1970s and early 1980s, global oil consumption actually dropped (due to the shift to energy-efficient cars,^[72] the shift to electricity and natural gas for heating,^[73] and other factors), then rebounded to a lower level of growth in the mid 1980s (see chart on right). The shift to reduced consumption in these areas meant that the projection assumptions were not realized and, hence, oil production did not peak in 1995, and has climbed to more than double the rate initially projected.

Colin Campbell of the Association for the Study of Peak Oil and Gas (ASPO) has suggested that the global production of conventional oil peaked in the spring of 2004, albeit at a rate of 23 gigabarrels per year rather than Hubbert's 13 gigabarrels per year. During 2004, approximately 24 billion barrels of conventional oil were produced out of the total of 30 billion barrels of oil, the remaining 6 billion barrels coming from heavy oil and tar sands, deep water oil fields, and natural gas liquids (see adjacent ASPO graph). In 2005, the ASPO revised its prediction for a world peak again, from both conventional and non-conventional sources, to the year 2010.^[8] These consistent upward revisions are expected in models which do not take into account continually increasing reserve estimates in older accumulations.^[74]

Another peak oil proponent Kenneth S. Deffeyes predicted in his book Beyond Oil - The View From Hubbert's Peak that global oil production would hit a peak on November 25, 2005 (Deffeyes has since revised his claim, and now argues that world oil production peaked on December 16, 2005).^[4]

Texas oilman T. Boone Pickens has stated that worldwide conventional oil production will top out at 84 Mb/day^[75] (31 Gb/yr), a claim supported by recently published data from the US Energy Information Agency,^[5] which suggests global oil production peaked in 2006. An October 2007 retrospective report by the Energy Watch Group concluded that this has indeed happened.^[6] Alternately, Albert Bartlett's paper on Arithmetic, Population, and Energy (exponential growth on a finite resource) gives a different insight into peak oil.

Sadad Al Husseini, former head of Saudi Aramco's production and exploration, stated in an October 29, 2007 interview that oil production could remain flat for the next "10 to 15 years", although market and production forces would raise prices by about $12 per year from 2007. Al Husseini also indicated oil production had likely already reached its peak in 2006^[7], and that assumptions by the IEA and EIA of production increases by OPEC to over 45 MB/day are "quite unrealistic."

The July 2007 IEA Medium-Term Oil Market Report projects a 2% non-OPEC liquids supply growth in 2007-2009, reaching 51.0 mb/d in 2008, receding thereafter as the slate of verifiable investment projects diminishes.^[77]

“

The concept of peak oil production and its timing are emotive subjects which raise intense debate. Much rests on the definition of which segment of global oil production is deemed to be at or approaching peak. Certainly our forecast suggests that the non-OPEC, conventional crude component of global production appears, for now, to have reached an effective plateau, rather than a peak.

”

The report points to only a small amount of supply growth from OPEC producers, with 70% of the increase coming from Saudi Arabia, the UAE and Angola as security and investment issues continue to impinge on oil exports from Iraq, Nigeria and Venezuela.^[77]

The IEA's plateau contention is refuted by some reports^[6] which suggest the IEA uses purely economic models that rely on the ability to raise production and discovery rates at will. Reserves in general have been falling since 1980 when production eclipsed discoveries (notwithstanding suspicious recalculating of reserves discussed in other sections), and several sources believe that Peak Oil occurred sometime in 2006^[4][5][6][7]. Matthew Simmons, Chairman of Simmons & Company International, said on October 26, 2006 that global oil production may have peaked in December 2005, though he cautions that further monitoring of production is required to determine if a peak has actually occurred.^[78]

Saudi Arabia's King Abdulla appears to have seen the writing on the wall as early as 1998, telling his subjects, "The oil boom is over and will not return... All of us must get used to a different lifestyle." Since then he has implemented a series of corruption reforms and government programs intended to lower Saudi Arabia's dependence on oil revenues. The royal family was put on notice to end its history of excess and new industries were created to diversify the national economy.^[79]

Analysts from Wood Mackenzie contend that maximum production of oil will not occur before 2014. Kate Dourian, Platts' Middle East editor, has a different opinion. "Some sources say half the world's oil has already been produced, whereas Saudi Aramco is saying there is still another trillion barrels out there." She also states that politics has entered the equation. "Some countries are becoming off limits. Major oil companies operating in Venezuela find themselves in a difficult position because of the resource nationalism that's spreading. These countries are now reluctant to share their reserves"^[80]

Commodities trader Raymond Learsy, author of Over a Barrel: Breaking the Middle East Oil Cartel, contends that OPEC has trained consumers to believe that oil is a much more finite resource than it is. To back his argument, he points to past false alarms and apparent collaboration.^[22] He also believes that Peak Oil analysts are conspiring with OPEC and the oil companies to create a "fabricated drama of peak oil" in order to drive up oil prices and profits. It is worth noting oil had risen to a little over $30/barrel at that time. A counter-argument was given in the Huffington Post after he and Steve Andrews, co-founder of ASPO, debated on CNBC in June 2007.^[81]

In October 2007, with oil prices in the United States over $90 per barrel, the Energy Watch Group, a German research group founded by MP Hans-Josef Fell, released a report claiming that oil production peaked in 2006 and will decline by several percent annually. The authors predict negative economic effects and social unrest as a result.^[82][6]

Further information: List of oil fields

Peak Oil as a concept applies globally, but it is based on the summation of individual nations experiencing peak oil. In State of the World 2005, Worldwatch Institute observes that oil production is in decline in 33 of the 48 largest oil-producing countries.^[83] Other countries have also passed their individual oil production peaks.

The following list shows significant oil-producing nations and their approximate peak oil production years.^[84]

• Australia (disputed): 2004; 2001
• Egypt: 1987^[85]
• France: 1988
• Germany: 1966
• Iran: 1974
• India: 1997
• Indonesia: 1991^[86]
• Japan: 1932 (assumed; source does not specify)
• Libya: 1970
• Mexico: 2003
• New Zealand: 1997^[87]
• Nigeria: 1979
• Norway: 2000^[88]
• Oman: 2000^[89]
• Russia: 1987
• Syria: 1996 ^[90]
• Tobago: 1981^[91]
• Venezuela: 1970
• UK: 1999
• USA: 1970^[92]

Peak oil production has not been reached in the following nations (these numbers are estimates and subject to revision):^[93]

• Iraq: 2018
• Kuwait: 2013
• Saudi Arabia: 2014

In addition, the most recent International Energy Agency and US Energy Information Administration production data show record and rising production in Canada and China.

Kate Dorian of Platts has noted that "some oil-rich countries are restricting oil sales outside of their country. These countries are now reluctant to share their reserves."^[80] According to consulting firm PFC Energy, only 7% of the world's estimated oil and gas reserves are in countries that allow companies like ExxonMobil free rein. Fully 65% are in the hands of state-owned companies such as Saudi Aramco, with the rest in countries such as Russia and Venezuela, where access by Western companies is difficult. The PFC study implies political factors are limiting capacity increases in Mexico, Venezuela, Iran, Iraq, Kuwait and Russia. Saudi Arabia is also limiting capacity expansion, but because of a self-imposed cap, unlike the other countries.^[94] As a result of not having access to countries amenable to oil exploration, ExxonMobil is not making nearly the investment in finding new oil that it did in 1981.^[95]

Mexico nationalized its oil industry in 1938, and has never privatized, restricting foreign investment. Since the giant Cantarell field in Mexico is now in decline, the state oil company Pemex has faced intense political opposition to opening up the country's oil and gas sector to foreign participation. Some feel that the state oil company Pemex does not have the capacity to develop deep water assets by itself, but needs to do so if it is to stem the decline in the country's crude production.^[96]

Major oil companies operating in Venezuela have had difficulty with the spreading resource nationalism. Exxon Mobil and ConocoPhilips have said they would walk away from their large investment in the Orinoco heavy-oil belt rather than accept tough new contract terms which raise taxes and oblige all foreign companies to accept minority shares in joint ventures with the state oil company, Petróleos de Venezuela (PDVSA).^[97]

Iran, now among the world's leading crude-oil exporters, could become a net importer of oil within the next decade due to rising demand and slow-growing production.^[98] Possessing the world's second-biggest proven reserves of oil, it infuriated its people when the government brought in petrol rationing on two hours notice.^[99] Due to limited refinery capacity, it has discouraged gasoline usage. Shortly after the petrol/gasoline rationing, which has reduced demand in some areas by 20%-30%, it announced it will not be producing cars powered only by gasoline.^[100]

In Russia, Vladimir Putin's government has pressured Royal Dutch Shell to hand over control of one major project on Sakhalin Island, to Russia's Gazprom in December. The founder of formerly private Yukos has also been jailed, and the company absorbed by state-owned Rosneft.^[101] Such moves strain the confidence of international oil companies in forming partnerships with Russia.^[98]

Main article: Oil price increases of 2004 and later

An oil price chart can be seen here.

In terms of 2007 inflation adjusted dollars, the price of oil peaked at an equivalent of $101 in 1980. Despite wide fluctuations, crude oil prices in the last several years have steadily risen from about $25 a barrel in August of 2003 to over $98 a barrel in October and November of 2007. Helping to fuel these increases are reports from the U.S. Department of Energy and others that show a decline in petroleum reserves, and analysts reporting that petroleum production is at^[4][5][6][7] or near full capacity^{[102][8] [103]}.

On the demand side, global consumption of oil in 2004 was 30 billion barrels, while in 2005 the annual demand rose to over 31 billion barrels. Only eight billion barrels of new oil reserves were discovered in new accumulations in 2004.^[104] At 84.9 million barrels produced per day in 2005, consumption was within 2 Mbbl/d of production. At any one time there are about 54 days of stock in the OECD system plus 37 days in emergency stockpiles. In June 2005, OPEC admitted that they would 'struggle' to pump enough oil to meet pricing pressures for the fourth quarter of that year.^[105] The price of oil peaked again in the summer and winter of 2005, August of 2006 at $78.64, passed $80 in September of 2007, and to almost $100 in November 2007. These prices are well above where many commentators have predicted economic effects^{[citation needed]}.

Besides supply and demand pressures, at times other factors may have contributed to increases in prices, including the "War on Terror", missile launches in North Korea, the Crisis between Israel and Lebanon, nuclear brinkmanship between the US and Iran^{[dead link][106]} , a possible incursion by Turkey into Northern Iraq hurricanes^{[citation needed]}, lower reserve data in the US,, unrest in Nigeria and Mexico, and a falling US dollar.^[107].

Oil's historically high ratio of Energy Returned on Energy Invested continues a significant decline. Despite the rapid increase in the price of oil, neither the stock markets nor the growth of the global economy have been noticeably affected. Arguably, inflation has increased; in the United States, inflation averaged 3.3% in 2005-2006, as compared to an average of 2.5% in the preceding 10-year period.^[108] As a result, during this period the Federal Reserve has consistently increased interest rates to curb inflation.

There is controversy regarding the potential effects of oil-price shocks. Some see these increases in the price of oil leading to a recession comparable to those that followed the 1973 and 1979 energy crises or a potentially worse situation such as a global oil crash. The effect in many European countries, which have high fuel taxes that could be temporarily or permanently suspended, could be mitigated. However the effect such a huge loss of revenue would have on those governments is unclear. In addition, this option is unavailable to countries which have much lower gas taxes, such as the United States.

Some economists predict that a substitution effect will spur demand for alternate energy sources, such as coal or liquefied natural gas. Outside the U.S., more than 50% of oil is consumed for stationary, non-transportation purposes such as electricity production where it is relatively easy to substitute natural gas for oil^[109]. This substitution can only be temporary, as coal and natural gas are finite resources as well.

The increased price of oil also makes non-conventional sources of oil retrieval more attractive to businesses. For example, tar sands are a far less cost-efficient source of heavy, low-grade oil compared to conventional crude, which become attractive to exploration and production companies when prices are high enough to cover production. Recent months have seen billions of dollars invested in the tar (bitumen) sands^{[citation needed]}.

Prior to the runup in fuel prices, many motorists opted for larger, less fuel-efficient sport utility vehicles and full-sized pickups in the United States, Canada and other countries. This trend is now reversing due to sustained high prices of fuel. The September 2005 sales data for all the vehicles vendor indicated SUV sales dropped while small cars sales increased. There is also an ever increasing market for hybrid and diesel vehicles. Since the 1973 energy crisis, the front-wheel drive passenger car has replaced rear-wheel drive as the preferred layout for energy efficient cars.

In working class families (who earn a living wage with no benefits), those who have older vehicles averaging less than 20 MPG are increasingly forced to turn to alternative methods of transportation: public transportation, carpooling, motorcycles, scooters, bicycles or walking and/or relocation into the inner city.

Part of the current debate revolves around energy policy, and whether to shift funding to increasing energy conservation, fuel efficiency, or other energy sources like solar, wind, and nuclear power. At congressional peak oil hearings, Rep. Tom Udall argued that while rising oil prices would encourage alternatives (both on the supply and demand side), the costs and impacts of other issues involved with petroleum based personal transportation (such as pollution, the economic effects of global warming, security threats caused by sending vast amounts of money to the Middle East, and the costs of road maintenance) should also be taken into account. "Because the price of oil is artificially low, significant private investment in alternative technologies that provide a long-term payback does not exist. Until oil and its alternatives compete in a fair market, new technologies will not thrive."^[110]

The Congressional Budget Office suggests that, "the federal government could more effectively increase the efficiency of the nation's automotive fleet by raising gasoline taxes, imposing user fees on the purchase of low-mileage-per-gallon vehicles, or both." This would give automakers more incentive to research alternative fuel technology and increased efficiency (through lighter vehicles, better aerodynamics, and less wasted energy).^[111]

Hans-Holger Rogner, a section head at the IAEA, warned in 1997 that the level of incentive required for market driven research and development will actually rise. Because production costs are not expected to decrease and because of the continued emphasis companies give to short-term profits, "a regional breakdown for 11 world regions indicates that neither hydrocarbon resource availability nor costs are likely to become forces that automatically would help wean the global energy system from the use of fossil fuel during the next century."^[112]

The problems of privately funded research and development are not unique to peak oil mitigation. Bronwyn H. Hall, graduate economics professor at the Haas School of Business, points out that, "even if problems associated with incomplete appropriability of the returns to R&D are solved using intellectual property protection, subsidies, or tax incentives, it may still be difficult or costly to finance R&D using capital from sources external to the firm or entrepreneur. That is, there is often a wedge, sometimes large, between the rate of return required by an entrepreneur investing his own funds and that required by external investors." ^[113] The severity of the problem for energy is echoed in the International Energy Agency's latest report^[114]

In the US, transportation by car is guided more by the government than by an invisible hand. Roads and the interstate highway system were built by local, state and federal governments and paid for by income taxes, property taxes, fuel taxes, and tolls. The Strategic Petroleum Reserve is designed to offset market imbalances. Municipal parking is frequently subsidized.^[115] Emission standards regulate pollution by cars. US fuel economy standards exist but are not high enough to have effect. There is also a gas guzzler tax of limited scope. The United States offers tax credits for certain vehicles and these frequently are hybrids or compressed natural gas cars (see Energy Policy Act of 2005).

In order to be profitable, many alternatives to oil require the price of oil to remain above some level. Investors in these alternatives must gamble with the limited data on oil reserves available. This imperfect information can lead to a market failure caused by a move by nature. One explanation for this is Hotelling's rule for non-renewable resources. Even with perfect information the price of oil correlates with spare capacity and spare capacity does not warn of a peak. For example, in the early 1960's (10 years before oil production peaked in the United States), there was enough spare capacity in US production that Hubbert's predicted peak of 1966-1971 was "at the very least completely unrealistic to most people," preventing the necessary steps being taken to mitigate the situation. The absence of accurate information about spare production capacity exacerbates the current situation.^[116]

Lester Brown believes this problem might be solved by the government establishing a price floor for oil. A tax shift raising gas taxes is the same idea.^[117] Opponents of such a price floor argue that the markets would distrust the government's ability to keep the policy when oil prices are low.^[118]

It has been suggested that this article or section be merged with Peak_oil#Timing. (Discuss)

Not all non-'peakists' believe there will be endless abundance of oil. CERA, for example, which counts unconventional sources in reserves while discounting EROEI, believes that global production will eventually follow an “undulating plateau” for one or more decades before declining slowly.^[3] In 2005 the group had predicted that "petroleum supplies will be expanding faster than demand over the next five years."^[119]

Dr. R.C. Vierbuchen, Vice President, Caspian/Middle East Region, ExxonMobil Exploration Co. believes a peak, "from resource limitations, is unlikely in the next 25 years." He claims that future technologies will increase production, and that the peak will be the result of non-production factors.^[120]

Similarly, some analysts believe that the rising oil prices will instigate a move toward alternative sources of fuel, and that this will take effect long before oil reserves are depleted. Some have argued that while OPEC ensures through its regulations that oil prices do not fall too low, it also shows concern that overly inflated prices will cause many countries to move toward alternative energy sources, for economic as well as political reasons. In 1990 Saudi Arabia in particular flooded the market to prevent prices from going to high. The recent rise in oil prices to nearly $100 per barrel in November of 2007 brings the price well above where analysts have speculated that this process could take place, although it is expected that this would happen over an extended period of time.^[12][121]

The U.S. Energy Information Administration projects world consumption of oil to increase to 98.3 million barrels a day in 2015 and 118 million barrels a day in 2030.^[122] This represents more than a 25% increase in world oil production. A 2004 paper by the Energy Information Administration based on data collected in 2000 disagrees with Hubbert peak theory on several points:^[123]

• Explicitly incorporates demand into model as well as supply
• Does not assume pre/post-peak symmetry of production levels
• Models pre- and post-peak production with different functions (exponential growth and constant reserves-to-production ratio, respectively)
• Assumes reserve growth, including via technological advancement and exploitation of small reservoirs

The EIA estimates of future oil supply are countered by Sadad Al Husseini, retired VP Exploration of Aramco, who calls it a 'dangerous over-estimate'.^[124] Husseini also points out that population growth and the emergence of China and India means oil prices are now going to be structurally higher than they have been.

Colin Campbell argues that the 2000 USGS estimates is methodologically flawed study that has done incalculable damage by misleading international agencies and governments.^[125] Campbell dismisses the notion that the world can seamlessly move to more difficult and expensive sources of oil and gas when the need arises. He argues that oil is in profitable abundance or not there at all, due ultimately to the fact that it is a liquid concentrated by nature in a few places having the right geology. Campbell believes OPEC countries raised their reserves to get higher oil quotas and to avoid internal critique. He also points out that the USGS failed to extrapolate past discovery trends in the world’s mature basins.

Some commentors, such as economist Michael Lynch, believe that the Hubbert Peak theory is flawed and that there is no imminent peak in oil production; such views are sometimes referred to as "cornucopian" by believers in Hubbert Peak Theory. Lynch argued in 2004 that production is determined by demand as well as geology, and that fluctuations in oil supply are due to political and economic effects in addition to the physical processes of exploration, discovery and production.^[126]

Abdullah S. Jum'ah President, Director and CEO of Aramco states that the world has adequate reserves of conventional and non conventional oil sources for more than a century^[127][128], though Sadad Al-Husseini, a former Vice President of Aramco who formerly maintained that production would peak in 10-15 years, stated in October 2007 that oil production peaked in 2006^[7].

OPEC has never acknowledged imminent Peak oil concerns.^{[citation needed]} In OPEC's 2007 annual book^[129], which discusses issues such as future supply position, forecasted demand, and ultimate recoverable reserves (URR), the authors state that the conventional oil resource base is sufficient to satisfy demand increases over the projected period until 2030 at a price of $50-60 per barrel, increasing afterwards to account for inflation. It also states that, comparing the 5% confidence (P5) URR of 3300(sic) billion barrels from the 2000 USGS survey^[130] to what appears to be (there is no reference given) the 95% confidence (P95) URR of 1700(sic) billion barrels from the 1980 Rand corporation survey, production after 1980 has been only 1/3rd of reserve additions happening during the same period, which would contrast with Peak oil predictors. However, four other surveys from 1980 give estimates of 2600, 2400, 2280, and 2015 billion barrels.^[131] Comparing the average of the five 1980 estimates (2219 billion barrels when using the actual Rand estimate of 1800 billion barrels) to the P95 URR from the 2000 USGS survey (2272 billion barrels), production after 1980 has been over 10 times more than reserve additions.

Main article: Abiogenic petroleum origin

The theory that petroleum derives from biogenic processes is held by the overwhelming majority of petroleum geologists in the United States. Abiogenic theorists however, such as the late professor of astronomy Thomas Gold at Cornell University, assert that the sources of oil may not be “fossil fuels” in limited supply, but instead abiotic in nature. They theorize that if abiogenic petroleum sources are found to be abundant, Earth would contains vast reserves of untapped petroleum.^[132] One of the main counter arguments to the abiotic theory is that biomarkers, which have been found in all samples of all the oil and gas accumulations found to date, suggest that oil comes from a biological origin and that oil is generated from kerogen by pyrolysis.^[133]

Although the finiteness of the earth's oil supply means that peak oil is inevitable, technological innovations in finding and drilling for oil have at times changed the understanding of the total oil supply on Earth.^[134]

• In 1855, people could only access whatever oil happened to seep to the surface, and an advertisement for Kier's Rock Oil stated, "Hurry, before this wonderful product is depleted from Nature’s laboratory."

• In 1874, the state geologist of Pennsylvania, the United States' leading oil-producing state, said that all the oil would be gone by 1878.

• In 1920, the U.S. Geological Survey stated that the world only had 60 billion barrels of oil left.

• In 1950, geologists estimated that the world had 600 billion barrels of oil.

• Since the 1960s, major oil surveys have shown P95 EUR of close to 2,000 billion barrels (see below).

• In 1970, scientists estimated that the world had 1,500 billion barrels of oil.

• In 1994, the U.S. Geological Survey estimated that the world had 2,400 billion barrels of oil.

• In 2000, the U.S. Geological Survey estimated that the world had 3,000 billion barrels of oil (P95 EUR of 2,300 billion barrels—see below).

The 95% confidence Estimated Ultimate Retrieval (EUR) of a little under 2,000 billion barrels has been the average finding of major oil surveys since 1965. The 2000 USGS survey assumed a discovery trend over the next 20 years which would completely and dramatically reverse the observed trend of the past 40 years. Their 95% confidence EUR of 2,300 billion barrels assumed that discovery levels would stay steady, despite discovery levels having fallen quickly and steadily since the 1960s. That trend of falling discoveries has continued in the 7 years since the USGS made their assumption.^[6]

None of this means that new oil is forming, or that peak oil will never happen, but it implies that technological advances have allowed the discovery and recovery of more oil than was historically expected. As oil estimates have remained steady since the 1960s this appears to no longer be the case, as can be seen above. Nevertheless, one significant source of uncertainty is the continuing inability to independently audit stated reserves from many of the world's biggest oil producers.

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