Peak Oil Theory: Definition & Implications

Instructor: Mark Koscinski

Mark has a doctorate from Drew University and teaches accounting classes. He is a writer, editor and has experience in public and private accounting.

In this lesson you will learn about the Peak Oil theory, the man behind the theory and how it was developed. We will discuss potential future economic implications and why some feel the theory is no longer relevant.

What is Peak Oil Theory?

Peak Oil theory was introduced to the world in 1956. The theory states oil and fossil fuels are finite and will eventually be depleted. There is a point in time when maximum oil production will be reached and then decline. Another premise of the theory states petroleum production of any oil field resembles a bell curve. The first 20% of the curve known as pre-peak which is affected by discovery rates, production rates and production itself. As discovery and understanding of the field increases and infrastructure is developed, production starts to peak. Once the peak is achieved, production eventually falls due to source depletion.

Various schools of thought exist about this theory. Some have an optimistic view extending the peak date further into the future around 2020. (Way too close for comfort!) Others believe the peak has already occurred in 2007 (our goose is already cooked) and we are on the downslide of the peak. Either way the future does not look promising if we stay upon the current trajectory of massive fossil fuel consumption.

The Father of Peak Oil

Peak Oil theory was first presented to the world by M. King Hubbert who worked in the oil and gas industry from 1942 until 1964. He later worked for the United Stated Geological Service as a Senior Research Geophysicist until 1976. Hubert was extremely well educated, earning a doctorate and degrees in geology, mathematics and physics. ''King'' Hubbert became world famous in 1970 when his prediction of a downward slope in oil production began to come true at that time. His theory was later debated and questioned when new technology extended the original projected peak date.

Economic Implications

It is hard to imagine what the world's economic landscape will look like in a post-petroleum environment. The world's complicated economic system is dependent upon fossil fuels, especially oil. Much like farmers of the early 19th century could not imagine what our debt-dependent society looks like today we have trouble imagining our own economic future once world oil production begins to wane. The following are some possible economic outcomes.

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