What Is Peak Oil? Have We Reached It?

Peak oil is the theoretical timeline for when domestic or global oil production will hit its maximum rate and begin to decline. It’s the idea that—at some point—the world’s finite quality and quantity of oil will decline to such low numbers that it would no longer be economic to produce.

The concept has been the subject of debate for decades, backed by a slew of peer-reviewed studies, government research, and analyses conducted by oil industry leaders arguing underlying expectations of peak oil demand.

Peak Oil Definition and Theory

The peak oil concept was first derived from Marion King Hubbert, a research geophysicist who developed a theory that oil production follows a bell-shaped curve. Hubbert worked for the Shell Oil Company at the time and used the theory to advocate for alternative energy sources. Throughout the rest of his career, he went on to work as a senior research geophysicist for the United States Geological Survey and also taught at Stanford, Columbia, and the University of California Berkeley.

In 1956, Hubbert presented a paper at a meeting of the American Petroleum Institute in which he hypothesized that U.S. petroleum production would peak between 1965 and 1975. The model showed the peak happening at 2.5 billion to 3 billion barrels per year and declining rapidly until 2150, when production would slow back down to 19th-century levels. He later predicted a similar trend after focusing his research on the global production of crude oil, reporting that the world’s oil production would peak in 2000 to roughly 12 billion barrels per year before disappearing completely in the 22nd century.

Hubbert’s primary goal with these findings was to highlight the superiority of nuclear power over fossil fuels, citing that the heat obtainable from one gram of uranium or thorium was equal to that of three tons of coal or 13 stock tank barrels of petroleum. Specifically, he wanted to utilize uranium deposits in the Colorado Plateau.

In 1998, petroleum geologists Colin Campbell and Jean Laherrère published a paper in Scientific American that re-examined Hubbert’s model for the first time since he’d first presented it in 1956. By then, Hubbert’s peak oil theory had been largely forgotten due to the low oil prices in the late 1980s, convincing most people that the Earth still held plenty of oil for future generations to use as a cheap energy source. Campbell and Laherrère used the same bell-shaped curve in their thesis, only this time they predicted that the global oil production industry would peak sometime between 2004 and 2005 before beginning to decline sharply. 

Arguments Against Peak Oil

Most people consider oil to be a finite energy source. Crude oil exists in liquid or gaseous forms underground, either in reservoirs, pooled between sedimentary rocks, or nearer to the Earth’s surface in tar pits that bubble to the outside. After the crude oil is removed from the ground using methods like drilling or mining, it is sent to a refinery to be separated into different petroleum products, including gasoline, jet fuel, and the synthetic materials that are in almost everything we use (from asphalt and tires to golf balls and house paint).

Although the U.S. Department of Energy maintains emergency petroleum reserves, it took millions of years for the Earth to fill up with enough hydrocarbons to give us the fossil fuel resources we use today, keeping crude oil from being considered a renewable energy source.

There are, of course, arguments against peak oil, some of which rest on denying crude oil as a finite resource that will someday peak and eventually decline (theoretically, today’s organic material could turn into more fossil fuels, it would just take a very, very long time).

Since we have been so reliant on fossil fuels throughout history, we already have a developed infrastructure that is set up for their use and oil companies are already experienced in extraction, so they are cheaper to produce. A lot of these arguments come from those who have the most to lose from a transition away from fossil fuels: the big oil industry.

Environmentalists refute with countless studies as to the enormous toll that fossil fuel extraction has on our landscapes and ecosystems, threats to waterways, toxic air pollution, ocean acidification, and the big one—the large amount of carbon dioxide emitted by burning fossil fuels and the subsequent contributions to climate change. In 2019, for example, fossil fuel combustion (burning) accounted for 74% of total greenhouse gas emissions in the United States.

Companies like BP have vowed to change their business models based not on the fact that we are likely to run out of oil, but rather that the world’s transition to low carbon energy systems and renewable power will lower the population’s dependency on oil. Shell, another oil industry giant, announced its intentions to start reducing oil production in February of 2021; the company had already reached its own peak oil, and expected a future yearly output decline of 1% to 2%.

There is also the idea that behavior changes like working from home, traveling less, and opting for public transportation will persist, leading to even less oil demand. This prediction is pretty valid, considering that global demand for oil dropped by 29 million barrels a day in 2020.

Have We Reached Peak Oil?

As it turns out, Hubbert’s theory that the United State’s oil production would peak in 1970 proved itself to be true. That year, the country produced 9.64 million barrels of crude oil and fell sharply downward after. But then, something happened that Hubbert did not predict. A good 40 years later, in the 2010s, oil began to climb upward rapidly, hitting a brand new peak in 2018 at 10.96 million barrels per day (a 17% increase from the previous year). All of a sudden, the United States was the world’s top crude oil producer, and continued to maintain the lead into 2019 and 2020. In 2020, the U.S. produced 15% of the world’s crude oil, mostly from Texas and North Dakota, surpassing that of Russia, Saudi Arabia, and Iraq.

Why did this happen? With the advancement of technologies in drilling and hydraulic fracturing (fracking), not to mention the improvements to detecting or finding fossil fuels, production growth has exceeded Hubbert’s initial calculations.

Therein lies the controversy. Was Hubbert truly correct in his prediction? Some energy analysts don’t think so, believing that peak oil was reached in the early 2000s rather than the 1970s. Others argue that the world hasn’t come close to reaching peak oil production yet, and that there are even more oil reserves lying undiscovered in the Arctic, South America, and Africa. Determining when peak oil will occur (or if it already has) is dependent on measuring the world’s available oil reserves and future oil extraction technologies.

What Will Happen After Peak Oil?

Peak oil doesn’t necessarily mean that the world will run out of oil, but rather that we will run out of cheap oil. With a majority of our economy and everyday lives reliant on a steady supply of cheap oil and petroleum products, the stakes are obviously quite high when it comes to peak oil theory.

A drop in oil supply would lead to a spike in oil and fuel prices, which would affect everything from the agriculture industry to the transportation industry to the technology industry. The consequences could be as serious as widespread famine as food supplies dwindle or a mass exodus from metropolitan areas as the oil supply drops. At its worst, peak oil could lead to massive public unrest, geopolitical upheaval, and the unraveling of the fabric of the global economy. If the peak oil theory holds, it only makes sense to begin investing in alternative and renewable sources of energy now.