Oil supply is critical to today’s global economy.
Pessimists such as Marion King Hubbert have argued that the world is running out of oil. Hubbert, for example, gave his name to ‘Hubbert’s Peak’, the original version of ‘peak oil’. It suggested that US oil production would hit a peak between 1965-70.
Hubbert was proved right, as production did indeed peak in 1970. But Hubbert’s other predictions were less successful. He forecast that US output would have declined to just 1.5mbd by last year. But in fact, new technology meant output was 7.5mbd.
Plus, of course, production would have been even higher if the US had opened up some of the most promising land/offshore areas for exploration. They are closed for environmental reasons, not because the oil doesn’t exist.
Yergin’s argument is that the truth is more complex than can be captured by a headline, or snappy sound-bite such as “peak oil”. As his chart above shows, world oil production hit a plateau in the 1970s, and again over the past few years.
But higher prices are already leading to new supplies coming on stream. Equally, technologists are still getting better at extracting more oil from existing fields. Today, for example, only 35%-45% of the available oil is ever recovered from a field.
Yergin also notes that cumulatively, the world has produced ~1trn barrels of oil since the industry was founded 200 years ago. He adds that:
“Currently, it is thought that there are at least five trillion barrels of petroleum resources in the ground, of which 1.4 trillion are deemed technically and economically accessible enough to count as reserves (proved and probable).”