Review and Analysis of the Peak Oil Debate
Final rept. Jan-Mar 2008
INSTITUTE FOR DEFENSE ANALYSES ALEXANDRIA VA
Pagination or Media Count:
The peak oil debate is concerned with the question of when global oil production will reach its historical maximum and enter a long inexorable decline. Peakists argue that oil production capacity is determined by geology and that global capacity will peak very soon -- within a few years to a decade. Optimists, on the other hand, argue that economic factors overwhelm the geologic arguments and conclude that peak oil will not occur for many decades in the future. This paper reviews arguments from both sides, focusing the discussion on three topics. First, the author reviews the Hubbert theory, examine its assumptions, and notes the criticism levied by optimists. He presents the results of his own modifications to Hubberts theory, which attempt to account for some of the critiques of optimists. In particular, he accounts for the impact of economic conditions on oil production in a simple, endogenous manner. Second, the author reviews peakist arguments that are based on declining discovery rates. Finally, he includes a section that reviews peakist concerns about Saudi Arabias oil production in particular, as described in a book by Matthew Simmons. The author concludes from these reviews that the most alarmist of the peak oil claims are likely false. Still, he sees some convincing reasons to think that global production could peak within 20 years, with demand outstripping production indefinitely.
- Economics and Cost Analysis
- Geology, Geochemistry and Mineralogy
- Manufacturing and Industrial Engineering and Control of Production Systems