Why Hubbert's Peak Oil Theory Fails?
Alahdal A. Hussein, May, 2015
There has been a growing interest in the topic of
peak oil theory for the past few decades. This interest
has emerged after the 1956's M.K. Hubbert peak oil
theory was successful to forecast 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 the United States' oil production
peaked in 1970 and consequently his theory proved
correct, many authors used Hubbert Curve to forecast
the oil production peak year in different countries.
Fig.1. Hubbert's 1956 prediction of world petroleum
production rates ( Source: Wikipedia ).
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 theory, Hubbert did not incorporate the
continuous growth in resources. The methodology
he used was based on imputing decline curves
against currently proven reserves and assert that the
game is over. According to Heinberg (2003),
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 continuous growth in the world oil
reserves which Hubbert's theory did not consider.
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.
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 )
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
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.
Despite the remarkable contribution, M. King
Hubbert’s peak theory falls down 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.
Heinberg, R. (2003). The Party's Over. Oil, War and the Fate of
Industrial Societies. New Society Publishers, Canada, 275 p.
Hubbert. M.K. (1956). Nuclear Energy and Fossil Fuels. Shell
Development Company, Exploration and Production Research
Division, Publication Number 95, 22 p.
Hubbert Peak Theory, Wikipedia [Online], Available: http://en.wikip
IHS CERA, 2007. “Why the Peak Oil Theory Falls Down: Myths
Legends, and the Future of Oil Resources”.
Laherrere, J.H. (1994). Published figures and political reserves.