Commentary: Weak world GDP growth & “peak oil”
(Note: Commentaries do not necessarily represent the position of ASPO-USA.)
As we previously forecast, the decline in world oil production is likely to occur in the next 1-4 years, a year having passed since we forecast 2-5 years. Some believe that weak worldwide economic conditions will significantly extend the onset of decline. We believe that the delay will be essentially negligible.
Because of the myriad of variables, the timing of the onset of the decline of world oil production cannot be predicted with certainty. In the early 2000’s when we began our world oil production studies, we thought that future world oil production might peak sharply, similar to U.S. production, which sharply peaked in 1970. After all, “peak oil” implies a sharp peak. As we continued our studies, it became obvious that a sharp peak scenario was not necessarily the most likely. In particular, the pattern displayed by European oil production — a fluctuating production plateau before decline, became the most likely pattern (Figure 1).
Beginning in 2004, world oil production (total liquids) has been on a fluctuating plateau, as shown in Figure 2.
After extensive study of the issues as well as the forecasts of others, we concluded that the existing fluctuating world oil production plateau will likely continue in a narrow range and then transition into decline, similar to the situation in Europe (Figure 3).
If our model is correct, the onset of the decline will be delayed by only a matter of weeks, which is well within the uncertainty of our forecast. Our conclusion is illustrated in Figure 4 for a 4-year delay in the onset of decline and a 1 MM bpd reduction in oil production during that period.
The approximate numbers are simple: If the future 4 year plateau median is roughly 86 million barrels / day, then cutting the 4 year average by 1 million bpd buys 4 years x 52 weeks/year x 7 days/week x 1 / 86 = 2.4 weeks.
In other words, slow world GDP growth over the next 4 years, resulting in even a few million barrels per day lower world oil consumption, would result in a relatively small delay in the onset of world oil production decline, according to our model. If the early side of our forecast is correct (1-year), then the delay is much less.
Robert L. Hirsch is a former senior energy program adviser for Science Applications International Corporation and is a Senior Energy Advisor at MISI and a consultant in energy, technology, and management. Hirsch has served on numerous advisory committees related to energy development, and he is the principal author of the report Peaking of World Oil Production: Impacts, Mitigation, and Risk Management, which was written for the United States Department of Energy.