Perhaps there is an invalid extrapolation here, in which the production of a single oil field amidst a bunch of other slightly less expensive fields rises and then falls as the cost at that particular field becomes uncompetitively high. But the aggregate of all fields, with no easy suitable alternative fuel supply, might not follow that same pattern.
In that case, the price would continue to rise for some time yet, and the production would rise to meet the demand at that price point. If so, one would expect to see increasing production for at least another few decades given current demand trends.
Is there something in economics that studies the behavior of prices of goods for which there is a relatively fixed demand, a finite supply, and no obvious alternative?
A logistic model is also probably not a bad first approximation to the oil field exploitation distribution.
Interestingly, the only framework I know for studying the consumption patterns of different products is Leontieff's, but there are no prices involved. In fact, I am not convinced there is a "production possibility frontier" implicit in the model that one could use to derive marginal prices. Conversely, the simple-minded marginal relative pricing model takes a production curve as a given. I suspect the two ideas can be combined but I haven't been able to write the equations for it. OTOH, I'd be shocked if these textbook models were the Best Economics has to offer. Then again, these models have the advantage of being very simple to formulate and visualize. When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. — John M. Keynes
Hubbert peak theory - Wikipedia, the free encyclopedia
Based on his theory, in a paper[3] he presented to the American Petroleum Institute in 1956, Hubbert predicted that production of oil from conventional sources would peak in the continental United States around 1965-1970 (actual peak was 1970). Hubbert further predicted a worldwide peak at "about half a century" from publication and approximately 12 gigabarrels (GB) a year in magnitude. In a 1976 TV interview[4] Hubbert added that the actions of OPEC might flatten the global production curve but this would only delay the peak for perhaps 10 years.
Kenneth Deffeyes, Hubbert's understudy, wrote at least two books about Hubbert and his work. He goes into fascinating detail about the sequence of geological events that are required to turn fossils into oil and/or natural gas and why we find them today where we do. From there he develops Hubbert's theory for those of us who are not petroleum geologists. I recommend both books if you haven't read them.
Hubbert predicted the peak in US domestic production almost a quarter century before it happened. He called the peak within five years and, according to Deffeyes, the actual production numbers match his curve uncomfortably well, both before and after the peak. Later researchers including Deffeyes extended his work to look at global production and so far the numbers match again uncomfortably well. Deffeyes actually called the peak a couple of years ago in past tense. He pronounced himself no longer a prophet but an historian. I'm at work now and don't have that link handy, but if I can find it later I'll add another comment. I took his point to be that so-called conventional oil production would follow an inexorable, roughly symmetrical curve no matter what demand or price did. Somewhere in cyberspace, the ghost of de Chardin is smiling.
February 11, 2006 In the January 2004 Current Events on this web site, I predicted that world oil production would peak on Thanksgiving Day, November 24, 2005. In hindsight, that prediction was in error by three weeks. An update using the 2005 data shows that we passed the peak on December 16, 2005. . . . That's it. I can now refer to the world oil peak in the past tense. My career as a prophet is over. I'm now an historian.
In the January 2004 Current Events on this web site, I predicted that world oil production would peak on Thanksgiving Day, November 24, 2005. In hindsight, that prediction was in error by three weeks. An update using the 2005 data shows that we passed the peak on December 16, 2005.
. . .
That's it. I can now refer to the world oil peak in the past tense. My career as a prophet is over. I'm now an historian.
These are natural questions for someone in the early stages of addressing the issue.
Individual region profiles tend to have non symmetrical profiles more close to the first derivative of a Gompertz curve. But the Logistic is very simple to use and can in fact identify fairly the peak of a Gompertz like curve.
If so, one would expect to see increasing production for at least another few decades given current demand trends.
This is the crux of the matter. Every year, beyond the extra demand coming t the market, production has also to address the declining production for mature fields. CERA estimates this decline in 4.5% per year. That's almost 4 Mb/d every year (or a new Nigeria) to stay in the same place. If production goes up much higher it won't be soon before we a need a new Saudi Arabia every year to cope with depletion and extra demand. Where is that Oil?
When I studied Economics these were called Giffen goods. Geffen found that some goods would go up in price during times of Economic hardship, like bread. He thought these were indispensable goods that would rise in price because demand for them would increase from poorer families.
Today I understand this a completely different way. Geffen goods are those that get expensive first during times of resource driven resource constrains. Just like rice these days. Vencit omnia veritas.
asdf (funny name, why not zxcv?),
Take a look at your keyboard.
- Jake Ceterum censeo Chicago esse delendam
Oil will never be all gone, it will just be found in smaller pockets, greater depths, grosser forms (thicker, more sulphur,"oil sands", née tar sands...) and -- especially -- in fields that have given up a lot of oil already. Oil occupies pores in the rock (never a pool!), and it's hard to get all the grease out of something like that. First they let gas pressure push it out, then they pump stuff in to raise the pressure, or pump oil out as it drains into a hole, then they start heating the ground to make the stuff less viscous, or pump in detergent, or...
So the price rises, and people are forced to use something else, or just use less energy -- even though there's still a zillion tons of crud left in the ground. Words and ideas I offer here may be used freely and without attribution.
