Vol. 59 No. 2

February 2007

Guest Editorial

Peak Oil Theory Could Distort Energy Policy and Debate

Peter M. Jackson, Director of Oil Industry Activity, Cambridge Energy Research Associates

The “peak oil” debate continues to rage without any obvious progress. In essence, the peak oil lobby suggests, as it has been doing unsuccessfully for many years, that global production will soon reach a peak and then decline rapidly thereafter with dire global consequences. The “market view” of Cambridge Energy Research Assocs. (CERA), based on 2 decades of research, is also not a view of unlimited resources, but concludes that a plateau rather than a peak will occur—although not tomorrow—and that supply will not “run dry” soon thereafter. We hold that above-ground factors will play the major role in dictating the end of the age of oil.

To summarize several primary conclusions:

  • Based on a detailed bottom-up approach, CERA sees no evidence of a peak before 2030. Global production eventually will follow an undulating plateau for one or more decades before declining slowly. Global resources, including both conventional and unconventional oil, are adequate to support strong production growth and a period on an undulating plateau.
  • Despite his valuable contribution, M. King Hubbert’s methodology falls down because it does not consider likely resource growth, application of new technology, basic commercial factors, or the impact of geopolitics on production. His approach does not work in all cases—including on the United States itself—and cannot reliably model a global production outlook. For example, production in 2005 in the contiguous 48 states in the United States was 66% higher than Hubbert projected.
  • The debate should now move toward a better understanding of the key drivers of production, including the scale of global resources and the likely production outlook, which form the core of current disagreements and confusion. At the same time, there is a need to identify the signposts that will herald the onset of the inevitable slowdown of production growth and to ensure that policymakers outside the energy community have a clear understanding of possible outcomes and risks.

We respect the urgency and seriousness with which some with whom we disagree put their case. However, the peak oil theory causes confusion and can lead to inappropriate actions and turn attention away from the real issues. Oil is too critical to the global economy to allow fear to replace careful analysis about the very real challenges of delivering liquid fuels to meet the needs of growing economies. This is a very important debate, and as such it deserves a rational and measured discourse.

Resource Availability

Our analysis finds that the remaining global oil resource base is actually 3.7 trillion bbl—three times as large as the 1.2 trillion bbl estimated by peak oil theory proponents.

The global resource base of conventional and unconventional oil, including both historical production of 1.1 trillion bbl and yet-to-be-produced resources, is 4.8 trillion bbl and is likely to grow. This analysis of global reserves and resources includes both conventional and unconventional oil, as well as estimates of both field-upgrade potential and yet-to-be-found resources. CERA’s global liquids supply outlook is not one of endless abundance. Based on a range of potential scenarios and field-by-field analysis, world oil production will not peak before 2030, but the idea of a peak is itself a dramatic and highly questionable image.

Fig. 1—Undulating plateau vs. peak oil.

Global production eventually will follow an “undulating plateau” for one or more decades before declining slowly. The global production profile will not be a simple logistic or bell curve postulated by Hubbert, but it will be asymmetrical—with the slope of decline more gradual and not mirroring the rapid rate of increase—and strongly skewed past the geometric peak. It will be an undulating plateau that may well last for decades.

During the plateau period in later decades, demand growth likely will no longer be met largely by growth in available, commercially exploitable natural oil supplies. Nontraditional or unconventional liquid fuels such as production from heavy-oil sands, gas-related liquids (condensate and natural-gas liquids), gas to liquids (GTL), and coal to liquids will need to fill the gap.

Understanding the difference between a plateau and a peak followed by a precipitous decline, as well as understanding the timing of events, is critical to the global energy future. Corporations, governments, and other groups, including nongovernmental organizations, need to have a coherent description of how and when the undulating plateau will evolve so that rational policy and investment choices can be made. It is likely that the situation will unfold in slow motion and that there will be a number of decades to prepare for the start of the undulating plateau. This means that there is time to consider the best way to develop viable energy alternatives that eventually would provide the bulk of our transport energy needs and ensure that there is a useable production stream of conventional crude oil for some time to come.

An apparent peak in world oil production could appear if above-ground issues such as war, political change, or intractability in decision making by governments limit upstream investment and activity. But such an outcome would not be rooted in below-ground geological constraint in the next few decades. An apparent peak also could be triggered by technological change that offers substitutes for oil in transportation, thereby capping demand.

M. King Hubbert: Revisited

Despite his valuable contributions, the underlying analytical model formulated by the late M. King Hubbert fails to recognize that recoverable-reserves estimates evolve with time and are subject to significant change. It also under-plays the substantial impact of technological advances.

Hubbert’s method requires accurate knowledge of the ultimate recoverable reserves of an area. However, numerous studies point to the fact that, during the life of oil fields, resource estimates often increase as understanding of the field improves and new technology is applied. The U.S. Geological Survey, notably, points out that reserves growth accounted for 86% of total additions to reserves in the United States since 1950 and 86% of the additions to reserves in the North Sea since 1985.

Hubbert’s 1956 analysis of the U.S. Lower 48 is generally used as a proxy for total U.S. production. He could never have incorporated the impact of giant discoveries in Alaska and the deepwater Gulf of Mexico, and therefore he could not have predicted the production profile for the U.S. accurately.

Fig. 2—U.S. production, Hubbert vs. actual.

In addition, the method does not incorporate economic or technical factors that influence productive capacity; and, most importantly, it ignores the impact of both price and demand, the major drivers of production. As a result, total cumulative U.S. production between the high point in 1970 and 2005 exceeded Hubbert’s predictions by the equivalent of more than 10 years of U.S. production at present rates. Also, total annual production at the high point for the U.S. in 1970 was 600 million bbl higher—20%—than Hubbert’s projection of peak production for the U.S. Lower 48, although he anticipated its timing within 2 years.

Although Hubbert made an important contribution and raised important questions about future reserves and productive capacity, his methodology does not replicate the aggregate production of tens of thousands of oil fields currently producing globally or the impact of new exploration and ongoing field upgrades. The fact that the method appears to work in some areas and not others suggests it is of limited use and even fundamentally flawed.

Technology, Revisions, and Extensions

As noted, there are two striking omissions from Hubbert’s analysis. First, there is the underlying premise that technology is static, which has hardly been the case. And, second, Hubbert paid no attention to the impact of revisions and extensions in expanding recoverable oil resources from a typical reservoir.

Those who believe a peak is imminent tend to consider only proven remaining reserves of conventional oil, which they currently estimate at approximately 1.2 trillion bbl. In the view of many petroleum geologists, this is a pessimistic estimate because it excludes the enormous contribution likely from probable and possible resources as well as those yet to be found and plays down the importance of unconventional reserves in the Canadian oil sands, the Orinoco tar belt, oil shale, and GTL projects.

The peak oil theory is frequently supported with data indicating that new exploration activity is not sufficient to replace annual production. However, this part of the peak argument is an incomplete and therefore misleading analysis because it ignores the role of development (vs. exploration) projects in expanding reserves. Thus, it fails to understand economic factors that can point company and national strategies to emphasize development vs. exploration work.

By focusing on discovery and ignoring the increased knowledge regarding expanding volumes of many fields, it disregards the fact that revisions, additions, and exploration together have generated resource growth of as much as 320 billion bbl, or one-third more than total production, during the period from 1995 to 2003. CERA draws both on its own databases and those of its parent company IHS, which has the world’s most complete proprietary databases on oil production and resources.

Decline-Curve Assumptions

Hubbert-posited post-peak reservoir decline-curve assumptions are rebutted by observation that the geometry of typical oilfield production profiles is often distinctly asymmetrical and does not generally show a precipitous mirror-image decline in production after an apparent peak, even without the application of new technology or enhanced-oil-recovery techniques. As a result, in the U.S., where Hubbert came close to forecasting a peak accurately, oil production in 2005 was some 66% higher than projected by Hubbert, and cumulative production between 1970 and 2005 was some 15 billion bbl higher, a variance equal to more than 8 years of U.S. production at present rates.

It is not surprising that peak oil lobby projections of the date the peak would be reached continue to come and go. The most recent target, November 2005, came and went. Other projected dates for peak oil are 2007–2009, 2010, and 2012. These will also come and go.

Claims that current high oil prices signal a peak reflect a profound misunderstanding of the fundamentals of supply and demand. A 14% growth in Chinese oil demand in 2004 does nothing to prove a peak is here, any more than the 0.30% fall in Chinese demand in 2005 proves a peak. The peak argument is not presented in the context of a credible systematic evaluation of available data; its proponents have not made available a transparent and detailed analysis that would allow an objective and rational discussion. At base, their methodology is to apply decline curves against currently proven reserves and declare that the game, and the argument, is over.


It is no longer sensible to allow the issues about future supplies to be clouded in a debate grounded in a flawed technical argument. There is general agreement that a peak or plateau of sorts will develop in the next 50 years, and it is not helpful to couch the debate in terms of a superficial analysis of reservoir constraints. We believe that, considering the multitude of above- and below-ground factors that will control future productive capacity, it is not possible to calculate reliably the date of the peak except in general terms, nor is this the key issue.

There is a need to identify the signposts that will herald the onset of the inevitable slowdown of production growth and ensure that policymakers outside the energy community have a clear understanding of possible outcomes and risks. This involves a clear understanding of the main indicators we can extract from geology, economics, and technology, and an understanding of supply and demand and oil markets in general.

Oil is too critical to the global economy to allow fear to replace careful analysis about the very real challenges with delivering liquid fuels to meet the needs of growing economies. We invite others to join in a considered dialogue that now seems too easily lost in the rancor.

Peter M. Jackson is Director of Oil Industry Activity for Cambridge Energy Research Assocs., responsible for global oil and gas capacity outlook worldwide. A major component of his research is aimed at understanding current trends and challenges in productive capacity and reserves distribution as well as forecasting which areas will become a focus for E&P industry investment over the next 10 years. Jackson has 22 years of E&P experience with what were the U.K.’s two leading independent oil companies, Britoil and Enterprise Oil; as a geologist and manager in charge of projects in the U.K., Indonesia, and Italy; and serving as Chief Geologist for Enterprise and later as President and General Manager of Enterprise Oil’s Gulf of Mexico business. He earned a BSc degree from St. Andrew’s U. and a PhD degree from Edinburgh U.