Production flows from a given oil field naturally decline over time, but we keep trying harder and technology keeps improving. Which force is winning the race?
An oil reservoir is a pool of hydrocarbons embedded and trapped under pressure in porous rock. As oil is taken out, the pressure decreases and the annual rate of flow necessarily declines. A recent study of every well drilled in Texas over 1990-2007 by Anderson, Kellogg, and Salant (2014) documents very clearly that production flows from existing wells fall at a very predictable rate that is quite unresponsive to any incentives based on fluctuations in oil prices.
DATE OF PEAK
|Louisiana and GOM||1971|