Source: Adapted from BP Statistical Review of World Energy.
The oldest continuously operated oil well, called McClintock #1, is located south of Titusville, Pennsylvania, and started operations in 1861. Its initial output was about 50 barrels of oil per day, and after more than 155 years of operation, the well still produces about 1 barrel per day. This historical example indicates a process where an initially abundant resource slowly gets depleted. Although the well is likely to produce oil for a long time, it is beyond its peak production level. Based upon this observation about a single well, it is possible to infer that peak output applies to whole oil fields, and ultimately to global oil production.
In 1956, the geophysicist King Hubbert published a theory concerning the temporal evolution of oil production, which takes the shape of a bell curve. Oil production starts at zero and then rises to a peak that can never be surpassed. Once peak production has been reached, production declines, and prices go up until oil resources are depleted or too costly to have widespread use. Hubbert predicted that oil production in the United States would peak between 1965 and 1970, which attracted criticism, even ridicule, from the oil industry. His assumption turned out to be true, and oil production in the United States peaked in 1971 (it boomed again in the 2010s because of oil shale technology). The only fundamental way to establish a peak oil point is when the event has occurred. For the states of Pennsylvania, Oklahoma, and Texas, it was 1891, 1927, and 1972 respectively.
Consequently, the concept of peak oil can be inferred to global oil reserves, but with much uncertainty. The time framework for which oil production is expected to peak is subject to much debate. The International Energy Agency stated that peak oil would not occur until around 2030, while other commentators state it could happen earlier. Prior assumptions that the 2005 and 2010 peak oil scenarios did not occur (peak of 30 billion barrels per year). A 2020 peak oil scenario would place the peak production at 35 billion barrels, which was surpassed in 2018 and 2021. Still, the Covid-19 pandemic was associated with a notable drop in production in 2020.
Total oil reserves are estimated to be around 1,800 to 2,200 billion barrels, with about 1,700 billion barrels considered proven reserves. Under such circumstances, most of the remaining oil could be extracted by 2060. However, several nuances have to be brought forward concerning the validity of peak oil:
- New reserves. New large-scale oil reserves have been getting more difficult to find since the 1970s. New reserves tend to be in remote areas, offshore or difficult to recover. There have been serious issues concerning the real availability of oil reserves, as some figures have been inflated to uphold the confidence of markets and investors. Since reserves in many countries, mainly OPEC countries, are not audited by external sources, reporting agencies are likely to have overestimated potential oil reserves. Still, with technological development and investments, new reserves can be brought online, as the example of tar sands and shale oil underlines. Still, their economic recoverability tends to involve much higher prices.
- Demand. Oil consumption is far from being a constant growth process and has been subject to fluctuations, with growth rates gradually receding. Rapidly growing economies, particularly China, have imported more oil and significantly impacted the structure of global oil demand. Consequently, if demand goes up, the time remaining before the exhaustion of global oil supplies could get shorter. Still, demand can also decline, namely with technological improvements, shifts to alternative sources of energy, automated vehicles, and economic downturns where global and sectorial demand can face setbacks.
- Recoverability. A historical perspective on exploiting resources reveals that resources that are the easiest to access are exploited first. In contrast, resources that are more difficult to access are left for later times (if not overlooked). Oil extraction has followed the same principle as most of the easy-access oil has now been extracted. What remains is located in more remote areas (subarctic; offshore), is much deeper, or is much more complex to extract (e.g. tar sands and shale oil). This implies that the oil that can be extracted is much more difficult to recover than the oil that has been extracted so far. The last few hundred billion barrels of oil may be economically unrecoverable.
The concept of peak oil, although logical and substantiated, remains so far elusive.