World Annual Oil Production (1900-2007) and Peak Oil (2010 Scenario)

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 145 years of operation the well 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.

The geophysicist King Hubbert published in 1956 a theory concerning oil production, which takes the shape of a bell curve. Oil production starts at zero and then rises to a peak which 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 a widespread use. Hubbert predicted that oil production in the United States would peak between 1965 and 1970, which attracted strong criticism, even ridicule, from the oil industry. His assumption turned out to be true and oil production in the United States peaked in 1971. Consequently, his theory can be inferred to global oil reserves with global oil production expected to peak around 2010. There are indications that global oil production may have peaked in 2006, but this trend would take a few more years of observation to confirm. Still, the time framework for which oil production is expected to peak is subject to much debate with the International Energy Agency stating that peak oil would not occur until around 2030.

With total oil reserves estimated to be around 1,800 to 2,200 billion barrels, about 1,080 billion barrels have been extracted between the beginnings of commercial exploitations in 1860 and 2005. Another 1,500-1,600 billion barrels thus remain to be extracted, of which 1,000 billion barrels are proven reserves, the remaining 500-600 billion barrels consisting of reasonable assumptions. About 50% of all the petroleum consumption took place after 1984 and about 90% of all the petroleum that has ever been consumed was so after 1958. Under such circumstances, most of the remaining oil could be extracted by 2060. However, several nuances have to be brought forward:

• New reserves. No significant new oil reserves have been found since the 1970s, which may lessen the oil reserves that could be added to the 1,000 billion barrels of proven reserves. There has been serious issues concerning the real availability of oil reserves, as some figures have been inflated to uphold the confidence of markets and investors. For instance the oil giant Royal Dutch / Shell admitted in 2004 overestimating its oil and gas reserves by 22% (about 4.5 billion barrels). In 2005, Kuwait admitted that its largest field has peaked and that the extent of its reserves could be half of what was expected. The Cantarell oil field, Mexico's largest has also peaked with its output dropping 1.7 million barrels per day in 2007, down from its peak output of 2.1 million. 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.
• Demand. The consumption of oil is far from being a constant process. Between 1990 and 2000, annual oil consumption increased by 14% with expectations that this process may go on up to 2020, especially in Pacific Asia with countries such as China importing more oil, which explains the recent surge in global oil production. Consequently, if demand goes up, the time remaining before the exhaustion of global oil supplies could get shorter. Still, demand can also decline for several reasons, namely with cycles of economic recession where global and sectorial demand can face serious setbacks.
• Recoverability. An historical perspective on the exploitation of resources reveals that resources that are the easiest to access are exploited first, while 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 and what remains is located in more remote areas (subartic; offshore) and/or is much deeper. 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.