Oil and Gas Handbook


Future Trends


Chapter 7:

Oil supplies may not last forever, but oil will be available long after our children's lifetimes. While no one can accurately predict oil's relative supply and demand, even in the near future, several theorists have attempted to predict when the world will deplete its oil supply. The most notable theorist on this subject is M. King Hubbert.



Hubbert's Peak

In the 1950's, Hubbert claimed that oil was a resource which would not last forever and that production will rise to a point which cannot be sustained and then die down to a point of total depletion. Understanding his model, one can conclude that once Hubbert's Peak has been reached, half of the world's oil reserves will have been depleted. This can also be used for an oil and gas field with many wells. When one takes what has already been produced from the field and what can potentially be produced for the field and combine these two numbers, they get the ultimate potential of the field. Its peak in production would be placed at the ultimate divided by two.

The problem with determining the peak in world production is one must use estimates to determine ultimate world production. There are three main numbers or concepts used to do this: 1) cumulative production or what is known as reserved production; 2) knowable, undiscovered production; or 3) what is predictable from past trends. From these numbers, we can estimate that ultimate equals cumulative production plus reserved production plus undiscovered production.

However, due to each country's different analysis for total production of oil and gas, determining the ultimate world oil production is very difficult and highly debatable.



Each country will have its peak. Hubbert predicted that the United States would reach its peak in the 1970's and it appeared to do so. The country was depending on Texas for the bulk of its oil, and when the Texas Railroad Commission announced in 1971 that Texas was at 100 percent capacity, the Organization of Petroleum Exporting Countries (OPEC) was created to control the supply of oil and gas for the world market.

Hubbert suggested that it will take many years to completely deplete the world's oil supply. However, he also suggested that each country will have its peak and then experience decreasing production from there. We are already seeing that some Middle Eastern countries may have peaked due to a decline in production. So, what does this mean for the oil industry? Cheap oil will likely be a thing of the past in the next 10-20 years.

While there is no denying that there is a finite amount of oil and gas on this planet, new technologies and recovery methods continue to increase the percentage of an existing field's recoverable oil and gas. At the same time, while the rate of discovery of new fields declines, we are getting better at finding them by digging deeper and in more isolated areas. Who's to say there will not be advances that once again tip the scales in favor of more supply than demand?