A finite resource will, by definition, have a beginning and an end of production and at some point the rate of production will reach a maximum. That point of maximum flow is the “peak” in Peak Oil. The study of peak oil is the contemplation of the timing of the peak and the effects of declining supply.
Modeling
(i.e. "Hubbert 1980 Fig. 4: Mathematical relations involved in the complete cycle of production of any exhaustible resource (modified from Hubbert 1956): "Production Rate" (annual barrels/year) vs "Time" (years) produce an idealized "Hubbert Curve" of "Ultimate Cumulative Production."1In 1956 M. King Hubbert, a geologist for Shell Oil, projected US crude oil production would peak around 1970. He used a form of logistics curve to plot past production in order to predict both the rate of production growth and the total amount that would eventually be produced, known as the ultimate recoverable reserve (URR). He asserted oil production would follow a bell shaped curve if not influenced by outside forces.
This complete cycle has only the following essential properties: The production rate begins at zero, increases exponentially during the early period of development, and then slows down, passes through one or more principal maxima, and finally declines negative exponentially to zero. 2
This simple models shows that at current consumption levels, large increases in URR result in only small increases in the upward trajectory and a slight delay before peak.
Extraction of crude oil from conventional fields in the US did indeed peak in the US in the 70's and the forecasting method became known as the Hubbert linearization and the Hubbert Peak. The model has been used by Hubbert and others to model a variety of resources, from coal to population.
The simple bell curve trajectory of increase, peak and terminal decline has born out in many oil producing regions. But elsewhere, including the world's 3 largest producers, outside forces come into play to alter the shape of that curve. Saudi Arabia, until recently (2014) acted as the watchdog of the OPEC cartel by increasing or reducing production in order to defend a target price. A plot of their production is anything but a smooth curve. In the Former USSR, political and economic collapse forced production into abrupt decline, now decades later, Russia is one of the top oil producers with record production. In the US, a second "peak" is imminent (2015). The 1970s peak in US oil extraction may turn out to be the true US maximum (by a small amount) or it may yet be exceeded.
Arguably, those three cases acted to truncate Hubbert’s bell curve of global production, lowering and delaying the peak.
In addition to production data, Hubbert had available detailed, uniform reserve estimates for the continental US dating back over 50 years. He was able to combine these estimates of past discoveries and current production to project the trajectory of extraction. The simple premise that you can only extract what you've discovered. This seems a logical method but unfortunately there are no global reporting standards or statutes. Only around 15% of global oil reserves are in the hands of corporations with any reporting requirements whatsoever, 85% of reserves are controlled by governments, and in many cases governments dependent on oil for political power. Oil is a business—in most cases a nationalized business, reported figures can only be viewed as commercial public relations at best and political propaganda at worst.
Forecasting future production by modeling past production then is the only option. But forecasting using history is tricky. It assumes technology will not improve, that all potential sources are known, that current economic parameters will not change.
Technology
Oil extraction could not increase quickly enough to satisfy large increases in demand in the 2000's and prices rose dramatically. In the US where privately held mineral rights enable a large number of small independent oil producers, high prices led to improvements in techniques to extract oil from previously discounted “tight shale" formations. Precise horizontal drilling and hydraulic fracturing target source rock that contains oil but where the small pore space prevent its movement. "Fracking" creates artificial fractures in the rock extending from the actual well-bore outward. These fractures allow the oil to flow out of the formation.
The future of this technique is unknown, the potential resource is large but many factors of production that are common in the US and in these formations are not present elsewhere. Additionally, extracting oil from these formations has a higher cost initially and the flow rate decreases dramatically from the first day of production, thus necessitating continual drilling to replace rapidly depleting older wells.
Oil from unconventional sources such as fracking shale, mining extra heavy tar sand as well as difficult locations in the deep ocean and polar regions are the future of oil production simply because the more conventional sources and locations cannot satisfy demand and are being constantly depleted. “Conventional” oil, that is readily flowing oil trapped in permeable “reservoirs” and which is easily extracted using simple vertical wells has increased very little in the 10 years 2005-2015. All of the increase has been in unconventional oil, and all of that in N. America (2015)
[I'd need to update this chart, or maybe someone might suggest a better version?
Price
The world of oil production forecasting is understandably dominated by earth scientists who see geology as the ultimate decider of production. But oil is produced for an economic reason: profit. Modern, mainstream economics essentially dismisses natural resources as a limit to economic growth, instead crediting innovation and human ingenuity as the ultimate resource. This view demands that our dependence on fossil fuels is not absolute, that the market will find an equal or better substitute. However, the reader would be hard pressed to glance at their surroundings and find many items not present as a result of petroleum.
Oil consumed to date: approx 1.4 trillion Barrels
Current (unaudited) estimates of profitably extractable oil remaining:1.7 trillion Barrels
Consumption per year: 34 billion barrels
Remaining reserves at current usage: 52 years
Source: BP Statistical Review 20151, L.F. Ivanhoe, 1997;
King Hubbert - Updated2, Hubbert, M. King, 1980;
Techniques of prediction as applied to the production of oil & gasBJ Fleay et al 1998:
Climaxing Oil: How Will Transportation Adapt?
