The concept of “Peak Oil,” which refers to the eventual decline in oil production, was first theorised by M. King Hubbert in the 1930s. He predicted that U.S. peak oil production would occur between 1965 and 1971. This argument faded over time, probably because countries did not experience the economic difficulties Hubbert initially forecasted. As a result, many people dismissed the idea of peak oil as a fallacy.
In hindsight, with improved computational and analytical tools, it is clear that the truth was obscured. Initially, this was due to geographical developments. As the U.S. continued to discover new reserves, production volumes only increased. Hubbert based his prediction on known reserves. More recently, technological advancements allowed the U.S. to extract oil from rock formations, which had previously been unavailable. In extracting conventional oil, little more than pumping was previously about all that was necessary. Such technical developments led to a belief that supply could always meet demand despite the finite nature of the resource.
However, when operations exploring these non-conventional oil sources, also known as shale or tight oil, began to follow the same Hubbert Curve, analysts reevaluated the data, sparking renewed debate. The discussion about peak oil production has resurfaced, highlighted by articles such as “U.S. Energy Dominance Continues: Another Annual Oil Production Record,” published by Forbes on 22 December 2024, and “The Specter of Peak Oil Production Looms Once Again“, published by Bloomberg on 13 March 2025.
The nuanced difference in U.S. oil production is presented in the chart below, which was prepared by Art Berman and discussed by economic researcher and futurist Chris Martenson in his video, The Return of Peak Oil: Why it Matters and What’s Next – Peak Prosperity published in March 2025.
Reading Exxon Mobil’s Global Outlook Executive Summary, published in August 2024, in the context of peak oil serves as a disturbing and poignant warning of what is to come.
Let us consider statements from page 4 of that report.
“Global oil and natural gas supplies virtually disappear without continued investment. As the world’s demand for oil and natural gas remains strong, sustaining investment is more important than ever.”
Society has now reached a global consensus that transitioning away from fossil fuels is crucial for the future; our existence is at stake. However, there is a noticeable disconnect between this consensus, individual decisions, and investment and consumer behaviour regarding this notion. Public policy is incoherent, expressing support in international forums like the COP meetings, while domestically, it continues to avoid hard decisions that would threaten growth and personal prosperity. There is a strong correlation between GDP, fossil fuel consumption, and CO2 emissions. Yet, the primary focus of political leaders remains on increasing GDP. Actions that could reduce GDP are often unpopular, leading to a lack of discussion or deliberation.
“Our Outlook reflects oil production naturally declining at a rate of about 15% per year. That’s nearly double the IEA’s prior estimates of about 8%.”
This natural decline indicates that we have likely passed what is often called Peak Oil. The reserves oil companies extract have a shorter lifespan, so they must develop additional sites more aggressively to ensure a continuous supply. This continuity is crucial for modern business. In our pursuit of greater profitability, we have adopted various practices that also increase fragility and reduce resilience. We are now entering a period where those choices will have consequences.
“This increase is the result of the world’s shifting energy mix toward ‘unconventional’ sources of oil and natural gas. These are mostly shale and dense rock formations where oil and gas production typically decline faster.”
This statement also suggests that we may have passed Peak Oil. People typically forget that oil is not fungible; this is to say that oil from one location is not identical to oil from another. Extracting oil and gas reserves from shale rock requires more effort than extracting conventional oil. Additionally, different reserves have varying chemical profiles, meaning an oil producer must modify refining more frequently. As the productive life of wells declines, these processing methods must be adjusted more frequently, leading to increased costs.
“To put it in concrete terms: With no new investment, global oil supplies would fall by more than 15 million barrels per day in the first year alone.”
Last year, Leigh Goehring and Adam Rozencweig wrote about what they call The Depletion Paradox. Despite rising prices and numerous undrilled locations, oil production is projected to decline due to structural factors. This scenario mirrors the experience of U.S. crude production in the 1970s. Following the OPEC crisis, a surge of optimism led to increased drilling, yet production continued to decrease.
Under an initiative announced by President Nixon called Project Independence, it became easier for companies to explore and drill for oil. Prices skyrocketed from $3.18 in 1973 to $34 by 1981—a tenfold increase—and drilling activity surged. However, production declined from 10 million barrels per day in 1970 to 8.5 million per day by 1981. By 2010, U.S. production had dropped to 5 million barrels per day despite prices remaining around $100, which exemplifies the Depletion Paradox. The current challenges the shale sector faces suggest that history may be repeating itself.
Goehring and Rozencweig consider: “The lessons of history are clear: enthusiasm for growth, however well-intentioned, cannot override the fundamental constraints of geology. And if we fail to heed these lessons, we risk not just disappointment, but the stark realisation that higher prices and bold policy initiatives are no match for depletion’s steady advance.”
“At that rate, by 2030, oil supplies would fall from 100 million barrels per day to less than 30 million – that’s 70 million barrels short of what’s needed to meet demand everyday.”
This shortfall is significant. Even if an individual doubts the likelihood of this being the future, given the nature of this change, it would be wise to prepare for it. It is also worth noting that we expect the supplies will not return to previous levels. As Goehring and Rozencweig say: “enthusiasm for growth, however well-intentioned, cannot override the fundamental constraints of geology”. Given the consensus that change is necessary, a managed transition is preferable to one forced upon us.
In 2021, the Geological Survey of Finland conducted a global assessment of what it would take to completely replace fossil fuels. The conclusion was that there “simply just not enough time, nor resources to do this by the current target set by the world’s most influential nations. What may be required, therefore, is a significant reduction of societal demand for all resources of all kinds. This implies a very different social contract and a radically different system of governance to what is in place today.”
In 2022, the Geological Survey completed an assessment for Finland. That assessment also outlined six scenarios for how the country could manage the transition. To my knowledge, no work has been done on the transition since.
“The world would experience severe energy shortages and disruption to daily lives within a year of investment ceasing.”
This ongoing investment is necessary just to maintain production levels because of the high decline rates. J. David Hughes calculates that the U.S. must replace 30 to 50% of shale gas production yearly with more drilling. Some analysts refer to it as “a treadmill to hell“, and others refer to it as the “Red Queen” syndrome, after a fictional character in Lewis Carroll’s Through the Looking-Glass.