Future of oil

The Hubbert peak theory, also known as peak oil, is a theory concerning the long-term rate of production of conventional oil and other fossil fuels. It assumes that oil reserves are not replenishable (i.e. that abiogenic replenishment, if it exists at all, is negligible), and predicts that future world oil production must inevitably reach a peak and then decline as these reserves are exhausted. Controversy surrounds the theory, as predictions for when the global peak will actually take place are highly dependent on the past production and discovery data used in the calculation.
Proponents of peak oil theory also refer as an example of their theory, that when any given oil well produces oil in similar volumes to the amount of water used to obtain the oil, it tends to produce less oil afterwards, leading to the relatively quick exhaustion and/or commercial unviablility of the well in question.
The issue can be considered from the point of view of individual regions or of the world as a whole. Originally M. King Hubbert noticed that the discoveries in the United States had peaked in the early 1930s, and concluded that production would then peak in the early 1970s. His prediction turned out to be correct, and after the US peaked in 1971 - and thus lost its excess production capacity - OPEC was finally able to manipulate oil prices, which led to the oil crisis in 1973. Since then, most other countries have also peaked: Scotland's North Sea, for example in the late 1990s. China has confirmed that two of its largest producing regions are in decline, and Mexico's national oil company, Pemex, has announced that Cantarell Field, one of the world's largest offshore fields, is expected to peak in 2006, and then decline 14% per annum.



For various reasons (perhaps most importantly the lack of transparency in accounting of global oil reserves), it is difficult to predict the oil peak in any given region. Based on available production data, proponents have previously (and incorrectly) predicted the peak for the world to be in years 1989, 1995, or 1995-2000. However these predictions date from before the recession of the early 1980s, and the consequent reduction in global consumption, the effect of which was to delay the date of any peak by several years. A new prediction by Goldman Sachs picks 2007 for oil and some time later for natural gas. Just as the 1971 U.S. peak in oil production was only clearly recognized after the fact, a peak in world production will be difficult to discern until production clearly drops off.
One signal is that 2005 saw a dramatic fall in announced new oil projects coming to production from 2008 onwards. Since it takes on average four to six years for a new project to start producing oil, in order to avoid the peak, these new projects would have to not only make up for the depletion of current fields, but increase total production annually to meet increasing demand. 2005 also saw substantial increases in oil prices due to temporary circumstances, which then failed to be controlled by increasing production. The inability to increase production in the short term, indicating a general lack of spare capacity, and the corresponding uncontrolled price fluctuations, can be interpreted as a sign that peak oil has occurred or is presently in the process of occurring.