“Peak oil” is something of a hot potato these days. On one hand, advocates assert that we have arrived at the point of maximum output and will soon see oil production going into a state of escalating prices and terminal decline. Critics of peak oil rebuff these claims as being made by soothsayers of gloom and doom. No one really knows where oil comes from, let alone how much there is or how long it will last.
The issue is not simply a matter of academic theory. At stake are energy policies involving jobs, corporate revenues, international relations between consuming and supplying nations and the security and stability of nations.
Peak oil refers to a point in the history of petroleum production where the rate of extraction reaches its maximum outpoint. The concept comes from the Hubbert Curve and is often referred to as the Hubbert Peak.
The Hubbert model suggests that production rates of petroleum will follow a roughly symmetrical logistical distribution curve, similar to a bell-shaped curve, based on the production limits and market pressures. It was first presented by M. K. Hubbert in 1956 to accurately predict that the point of peak oil for the US would be in 1970. In 1976, Hubbert predicted that global oil production would peak in 2005. While this has been publically debated by various critics of the peak oil theory, virtually all petroleum scientists use it as a starting point for demonstrating the amount of oil available in petroleum reserves.
According to the peak oil theory, after petroleum is discovered in a field, its production will rise as wells are drilled. The rise in production will continue until it reaches a point of maximum output. After that point, it will go into a terminal decline.
This concept is based on the assumption of finite quantities of oil, the production rates of individual wells and the level of technology available. It has been applicable as a means of estimating domestic production rates and, in principle, is also applicable to global rates of production.
In spite of the criticisms, major oil companies have acknowledged that their rates of production are entering a time of stagnant production and terminal decline.