Is the world running out of oil?

Fossil fuels in the form of crude oil, natural gas, and coal provide the vast majority of the US energy resources. Since the reserves of these fuels were created millions of year ago, and over the course of millions of years, they cannot be replaced in our time. Therefore, there is only a finite amount, and by definition they are being continuously depleted. In the 1950s, a distinguished scientist named Marion King Hubbert, who was working for Shell Oil's Exploration and Production Research Division at the time, published the first prediction as to when US oil production would peak. Since then, the concept of oil as a non-renewable and depleting resource has been a key aspect of the oil industry. The Arab oil embargoes of the 1970s brought the issue of finite reserves to the public forefront, and, since then, US consumers have feared there won't be enough energy to meet demand.

However, the oil industry has been driven by technology since the first oil well was drilled in Pennsylvania in 1959, and technology has allowed more oil and gas to be economically developed than once thought possible. Steam injection, seismic exploration, deepwater drilling, horizontal drilling, four-dimensional reservoir mapping, and hydraulic fracturing are just some of the technology advances that have been developed over the years.

It is very likely that this trend will continue for the next several decades, if not longer. The U.S. Energy Information Administration (EIA) estimates that U.S. total crude oil production averaged 8.9 million barrels per day in September 2014, driven largely by growth in tight oil production due to fracking (see Figure 1). In May 2015 they issued their projection of US crude oil production out to the year 2025 under 4 different oil price scenarios. Daily production in 2025 ranged from about 9.5 to 13 million barrels per day. Thus, even in a low oil price scenario, production increases slightly over the next 10 years. It should be noted that these scenarios only consider implementation of known technology.

It should be noted that Hubbert predicted that oil production from the lower 48 states would peak in about 1970. As shown in Figure 1, which plots annual production of oil from US fields, he was spot on in his prediction, if one ignores the impact that technology has had on drilling and production in recent years.

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