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Page added on September 8, 2015
Why Hubbert’s Peak Oil Theory Fails
There has been a growing interest in the topic of peak oil theory for the past few decades. The interest emerged after the 1956 M.K. Hubbert peak oil theory successfully forecasted the peak year of crude oil production in the United States. Hubbert used a quantitative technique -Logistic Growth Curve or Bell-Shaped Curve (Fig.1)- to model the conventional crude oil production profile of the lower 48 states in the United States (excluding Alaska). He predicted that crude oil production would peak in the late 1960s or early 1970s. According to Heinberg (2003), many economists and oil companies dismissed his prediction at that time. However, when United States oil production peaked in 1970, his theory proved correct. Thereafter, many industry observers used the Hubbert Curve to forecast the oil production peak year in different countries.
Fig.1. Hubbert’s 1956 prediction of world petroleum production rates (Hubbert,1956).
Although Hubbert peak theory garnered a lot of credibility after its success in predicting the peak of U.S. oil production, it started to fail after 1995 when the actual crude oil production decline rate was totally different from Hubbert’s prediction. Fig.2 shows the deviations of the actual crude oil production rate from what Hubbert predicted in his theory. The main reason for such discrepancy in the actual and predicted rate of crude oil production reduction according to Cambridge Energy Resource Associates (IHS CERA) (2007) is the fact that Hubbert did not consider the likely continuous resource growth, application of new and advanced technology, fundamental commercial factors, and the serious affects of geopolitics on production.
Fig.2. United States oil production excluding Alaska and Hubbert high estimate for the US (Laherrère, 2003).
II. CAUSES OF FAILURE:
1- Resource Growth
In his reasoning, Hubbert did not incorporate the continuous growth in resources. The methodology he used was based on imputing decline curves against currently proven reserves and asserting that the game is over. According to Heinberg (2003), Hubbert used an estimated ultimate recoverable reserve ( EURR ) between 150 to 200 billion barrels of oil. Based on this value, he estimated the U.S. oil production to peak at 3 billion bbl/year ( 8.2 million bbl/day ) anytime between 1965 to 1972 as shown in Fig.3. Hubbert theory succeeded in predicting the peak time, but there were few deviations in the actual production rate form what he predicted.
Fig.3. Hubbert’s Fig. 21 shows his 1956 forecast for USA oil production (Hubbert, 1956).
First of all, U.S. production rate peaked at 10 million bbl/day which was approximately 1.4 million bbl/day higher than what Hubbert predicted as shown in Fig.4. In addition, six years after peaking in November 1970, the U.S. production rate encountered its first deviation from Hubbert’s prediction. Oil production rose to 9.14 million bbl/day forming a secondary peak in the period between 1977 to 1986 as shown in Fig.4.
Fig. 4. Actual monthly USA oil production ( Data Source: EIA )
Furthermore, the second deviation from Hubbert’s prediction is the incline formed since late 2008 until the present time. In 2008, the U.S. produced five million bbl/day and just a year after that in 2009, U.S. production rate begun to rise until it averaged 8.3 million bbl/day in 2014.
Both deviations were due to new discovery and production of oil from the Prudhoe Bay, Kuparak oil fields in the north of Alaska and production from Gulf of Mexico along with unconventional crude oil coming from the Bakken oil play in North Dakota respectively. These deviations -rise in production- prove that the usefulness of Hubbert’s theory is limited because it requires a knowledge of totality of oil reserves in existence which is in a continuos growth leading to increase in production. Fig.5 shows the growth in the world oil reserves.
Fig. 5. World proved oil and gas reserves ( Data Source: EIA )
Although much of the easy oil -mostly located onshore and offshore in shallow water- was discovered and drilled, there are still many potential untapped reserves in different parts of the world. Therefore, predicting production peak and future trend without taking such resource growth into consideration leads to a misleading prediction.
2- Application of New and Advanced Technology
Similarly, Hubbert’s peak theory did not take into account the application of new and advanced technology that made the process of extracting oil cheaper and more efficient than it used to be. The application of such technology resulted in production increase. For instance, oil that 60 years ago may have been difficult and uneconomical to be extracted, could currently be recovered due to higher accuracy of surveys to locate the oil, advanced drilling technology and improved drilling methods.
Furthermore, the application of improved and new technology such as horizontal drilling and hydraulic fracturing have led to the production of shale oil in the United States and other countries that for years have been uneconomical to extract. This leap forward in oil-field technology -used for the drilling and extraction of once uneconomical to produce oil- is the main reason for rising the U.S. oil production rate in 2009. It clearly shows the critical role technology and innovation play in the increase of oil production which was not considered in Hubbert’s peak theory.
3- Economic Factors
Hubbert’s method failed to incorporate economic factors that directly influence productive capacity. The theory ignores the impact of two major drivers of production such as demand and price dynamics. It also fails to comprehend the economic factors that can direct the producing company and government national strategies to control the production rate of crude oil. All these factors play a crucial role in determining the production rate of any country and the world in general.
4- Geopolitical Impact
Hubbert peak theory also did not take into consideration the impact of geopolitics on oil production. For instance, a major war in the most oil-rich part of the world -the Middle East- for example, would definitely skew the Hubbert’s peak theory’s graph dramatically changing the rate of production. This is also one of the examples of Hubbert’s peak theory failure to acknowledge the impact of external variables on oil production rate.
III. CONCLUSION
Despite the remarkable contribution, M. King Hubbert’s peak theory fails because it did not incorporate the impact of resource growth, technology advancement and external variables such as geopolitical and economic events on production. The Hubbert’s model may work well under the assumption that everything else other than currently proven reserves remains equal, but of course in real life they never do. The restrictions we face today are more technological and economical than the amount of oil in the ground. We are limited by how inventive we are to find new resource and extract what is available.
70 Comments on "Why Hubbert’s Peak Oil Theory Fails"
marmico on Wed, 9th Sep 2015 8:56 pm
Hubbert’s curve fitting model screwed up Middle East ultimate potential oil reserves. Period.
Nony on Wed, 9th Sep 2015 9:02 pm
Hubbert followers are conceding the whole argument when they agree that the Hubbert approach fails to account for increases from raised price or technology.
GregT on Wed, 9th Sep 2015 9:04 pm
Hubbert didn’t predict reserves marmico, he used known reserve estimates at the time, in an attempt to determine when those fields would peak. His calculations have proven to be correct, almost to a T. Hubbert was a genius. Period.
shortonoil on Wed, 9th Sep 2015 9:04 pm
Note:
All of our graph dates are for the beginning of the year; the EIA reports year end.
GregT on Wed, 9th Sep 2015 9:06 pm
If you had actually read Hubbert’s 1956 report Nony, which it is very apparent that you haven’t, you would understand why your above statement is completely wrong.
shortonoil on Wed, 9th Sep 2015 9:20 pm
“Hubbert’s curve fitting model screwed up Middle East ultimate potential oil reserves. Period.”
“Hubbert followers are conceding the whole argument when they agree that the Hubbert approach fails to account for increases from raised price or technology.”
We know, we know; if you had been Pharaoh there would have been LEDs in those dam pyramids.
marmico on Wed, 9th Sep 2015 9:30 pm
in no way reflects anything that Hubbert said or predicted. As usual marmi is full of it.
You are such a fucking innumerate it is beyond belief. Hubbert modelled that 1250Gb barrels would be produced between 1850 and 2200 with a peak rate of 12.5Gb in 2000. Well, those 1250Gb barrels were produced by 2015 and the 2015 rate is 28.8Gb.
GregT on Wed, 9th Sep 2015 9:43 pm
“Hubbert modelled that 1250Gb barrels would be produced between 1850 and 220”
Has nothing what-so-ever to do with your above statement: “Hubbert’s curve fitting model screwed up Middle East ultimate potential oil reserves. Period.”
You are full of shit marmico. Go away and play in your sandbox.
marmico on Wed, 9th Sep 2015 9:59 pm
Hey Greggie T, you are now in Davy-land. An innumerate word salad prattler. I’ll reserve fucking demented and asshole until later.
GregT on Wed, 9th Sep 2015 10:05 pm
You have serious issues marmico, Get help.
Boat on Wed, 9th Sep 2015 11:27 pm
All the yack about Hubert. Did he take into account nat gas to gasoline? Heavy oil? Extra heavy oil? Oil sands? Short yacks about BTU. How much is coming out of the refineries. Yes world records.
As a side note. Even corn ethnol in the US is up to over 120 mbpd. Lets not forget the big picture here. Is there enough fuel? Yeppers Is there enough to drive the world’s economics engines? Are there more people that live longer and better lives because of all the fuel? Yeppers And yes climate change is another subject. Not the time to flip topics.
apneaman on Wed, 9th Sep 2015 11:52 pm
An innumerate word salad prattler.
An innumerate word salad prattler.
An innumerate word salad prattler.
An innumerate word salad prattler.
An innumerate word salad prattler.
An innumerate word salad prattler.
An innumerate word salad prattler.
An innumerate word salad prattler.
An innumerate word salad prattler.
An innumerate word salad prattler.
Uses it 5 times a day for how many years?
The redundant prattler.
apneaman on Thu, 10th Sep 2015 12:03 am
Fuck you Boat you’re the biggest mis director on here. Every time you are getting your ass kicked (often) you switch the subject to 1/32% refrigeration efficiency improvements or PVC pipe manufacturing musings. And since climate change has been triggered from burning the stuff it IS part of the topic – right fume brain.
Boat on Thu, 10th Sep 2015 12:03 am
oops ethnol is over 120 mbpmonth.
GregT on Thu, 10th Sep 2015 12:22 am
“All the yack about Hubert. Did he take into account nat gas to gasoline? Heavy oil? Extra heavy oil? Oil sands? ”
Yes Boat, he did. Instead of continuing to make yourself look like a dumbass, why not read his report.
GregT on Thu, 10th Sep 2015 12:47 am
Boat, Marmico, Econ101, Papasmurf, Nony. I’m beginning to sense a multiple personality disorder. If so, this is one screwed up individual. Scary actually.
GregT on Thu, 10th Sep 2015 1:19 am
“Lets not forget the big picture here. Is there enough fuel?” Yeppers
Not for everyone Boat, even within the country with largest economy in the world. Many people are living far below the poverty line, in first world nations.
“Is there enough to drive the world’s economics engines?”
No, apparently not. Economies are collapsing around the globe, and the economies that have not collapsed yet are stagnating, and being held together with austerity, historically low interest rates, and mountains of debt.
Are there more people that live longer and better lives because of all the fuel? Yeppers
Without a doubt, human beings now live better than they have throughout our entire history on this planet, but only around 30% of us. The rest still live in abject poverty. This comes at a price though, for all future generations, and life as we know it on this planet.
And yes climate change is another subject. Not the time to flip topics.
Climate change is not another subject. It is the direct result of our selfish and greedy behaviour. All this stuff that we never needed, is robbing our children of their futures.
Davy on Thu, 10th Sep 2015 5:20 am
@Marmi “you are now in Davy-land”. Love it! Sounds like a Disney world of happiness. I agree it is great where I am at thanks for noticing Marmi.
OH BTW how is the itty bitty portfolio doing Marmi? It was a red day for the Marmi boy. Marmi how low can it go before that dream condo in some cheap Sunbelt destination is toast?
shortonoil on Thu, 10th Sep 2015 7:20 am
“You are such a fucking innumerate it is beyond belief. Hubbert modelled that 1250Gb barrels would be produced between 1850 and 2200 with a peak rate of 12.5Gb in 2000. Well, those 1250Gb barrels were produced by 2015 and the 2015 rate is 28.8Gb.”
Marm you are such an idiot, and you know ZERO about Hubbert’s function:
The best fit to the logistic curve, which comes from the EIA’s data set is:
y = 2285.65 / (1+ 64.8708e^(-0.0414x))
The cumulative production function (CDF) approaches the abscissa of 2285.65 Gb. You can’t get accumulated production from the probability density function (PDF). The PDF is the first derivative of the the CDF, and gives a time rate of change.
Now backup your bullshit with an equation of form, or shut up! You are a mathematical imbecile that couldn’t calculate your change at the grocery store! You can’t even run a spell checker, its modeled, not modelled!
Davy on Thu, 10th Sep 2015 7:54 am
Short, the Marm doesn’t use equations he googles Freddy fluff charts then formulates a comment with maximum potty mouth. He figures the sheeples can read a graph and appreciate potty. He fails to see most here are not sheeples and see right through his lack of understanding of anything really. He is just a pissed off penny stock investor who’s itty bitty portfoilio is declining daily.