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The Security of Supply
While working for Shell Oil during the 1940′s Dr. M. King Hubbert noticed the production of crude oil from individual oil fields plotted a normal bell shaped curve. Roughly half of the oil from a field has been exhausted when the bell curve peaks.
Carrying that insight further he surmised that oil production from a group of oil fields would follow a similar bell shaped pattern.
In 1956 Dr. Hubbert predicted the cumulative group of oil fields within the US would reach peak production in the 1970′s, and thereafter decline – no matter how much money would be thrown at exploration and development of reserves US oil production would not rise higher after this date – his prediction was uncannily accurate.
There are a few things we can learn from studying oil production on the upside slope of Hubbert’s bell curve.
As oil production nears its peak
Oil becomes harder to find
Producing oil from existing fields becomes more expensive – recovering the last barrel of oil is more expensive than recovering the first barrel
