(Reuters) - The price of crude oil has hit record levels above $135 a barrel, pushing industry analysts to take more seriously peak oil, or the idea that global production is near an apex after which it will decline sharply.
The following are some facts about the concept, its adherents and its detractors.
- The theory of peak oil was first suggested by geoscientist Marion King Hubbert, who in 1956 predicted U.S. oil production would peak between 1965 and 1970.
Figures from the U.S. government Energy Information Administration show crude oil production peaked in the United States in 1970.
The Hubbert peak curve is a bell-shaped model of production for a particular country, region or the world, given an assumed total recoverable volume.
The theory has long been considered marginal, and premature declarations and inaccurate predictions have weakened its credibility.
- Output of oil world-wide is 86 million barrels per day (bpd) and will rise to 116 million bpd by 2030, according to the International Energy Agency (IEA), whose forecasts are a benchmark for the oil industry.
The strong growth in demand from developing countries, such as China and India, is also likely to continue in that period.
- Some oil majors acknowledge the prospect of dwindling production, while others maintain better extraction techniques and other advances will offset any decline.
- Texan oilman T. Boone Pickens said in 2005 worldwide production was close to peaking. This month he predicted $150 a barrel oil this year, after investment bank Goldman Sachs said prices could reach $200 within two years as part of a super-spike driven by poor growth in oil supplies. In 2002, a barrel cost less than $20.
Matthew Simmons, the chairman of a Houston-based investment bank specializing in the energy sector, said in late 2006 that the peak may have occurred in December 2005, but warned further monitoring was needed.
Simmons has long warned that leading producer Saudi Arabia may not have as much reserve capacity as it claimed. Saudi reserve data are classified as state secrets.
In response, the chief executive of the national oil company Saudi Aramco, Abdallah Jum‘ah, said only between a third and a sixth of the world’s oil has been consumed, and that the world’s largest oil field continues to produce at a high rate.
“All of this talk of Ghawar declining and so on, we really don’t give a lot of attention to it,” he said at an energy conference in February.
- In 2005, the U.S. Department of Energy published the Hirsch report, which looked at the possible effects of peak oil. It concluded oil production would probably peak abruptly, but more information was needed to determine the timeframe and comprehensive strategies could delay the effects.
The suggested implications of breaching the global production peak range from doomsday scenarios to suggestions the market economy will gradually bring in alternatives energy sources to replace fossil fuels.
One alternative to the peak oil scenario is the undulating plateau idea proposed by Cambridge Energy Research Associates and used to model a much slower decline over decades.
- Russia, the second-largest oil exporter after Saudi Arabia according to 2005 figures from the IEA, has recorded declining production so far this year after a decade of rapid growth. Five years ago, growth was at 12 percent.
Reporting by Alastair Sharp, editing by Barbara Lewis