Peak Oil

Peak oil is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters decline.  It is the point in time when the maximum rate of global petroleum extraction is reached, after which the rate of production enters terminal decline. The concept is based on the observed production rates of individual oil wells, and the combined production rate of a field of related oil wells. The aggregate production rate from an oil field over time usually grows exponentially until the rate peaks and then declines—sometimes rapidly—until the field is depleted. This concept is derived from the Hubbert curve, and has been shown to be applicable to the sum of a nation’s domestic production rate, and is similarly applied to the global rate of petroleum production. Peak oil is often confused with oil depletion; peak oil is the point of maximum production while depletion refers to a period of falling reserves and supply.

Oil is a finite resource formed in the geological past.  The great bulk of current production comes from just two brief epochs of global warming, 90 and 150 million years ago. Algae proliferated in the warm sunlit waters to provide the organic material that fell to the depths of stagnant rifts which formed as the continents moved apart. Gas was formed in a similar way, save that it was derived from vegetal remains as found in the deltas of tropical rivers. Once formed, the oil and gas moved generally upwards through the rocks to collect in structural traps containing porous reservoirs.

The question that must be answered to determine when Peak Oil will - or has - been reached is, how far along the oil depletion curve are we?  To answer the question, one must first know how much oil has been found, and when this occurred.  The second part to the answer, is how much has been extracted. Extrapolating from the discovery trend gives a good indication of what is left to find.

According to ASPO, reserves are exaggerated.  They say that because reserves are financial assets, oil companies report just as much as is needed to deliver satisfactory financial results and building up stocks of unreported reserves to tide them over lean discovery years. As a result, reserves have been progressively revised upwards, giving a misleading impression, commonly attributed to technology, when it has been a reporting practice.

The World started using more than it found in 1981, and in 2005 it found about one barrel of so-called Regular Conventional Oil for every five consumed.¹ This term describes the 'easy' oil that is the basis of most production to date and will dominate supply far into the future. It excludes oil derived from coal and shale, bitumen and heavy oil, deepwater and polar oil, as well as the liquids that are extracted from gasfields in specialised plants.

According to a variety of sources, from ASPO to T Boone Pickens to Saudi Aramco, global Peak Oil should be sometime between 2005 and 2010.

References

¹ ASPO - the Association for the Study of Peak Oil and Gas