Hubbert’s Forecasts and the Price of Oil: Lessons for Today’s Oil Market

This paper examines the data and methodology used by M.K. Hubbert to forecast oil production maxima, and also how these maxima influenced the price of oil. The methodology differentiated oil by category, used reliable data to determine a region’s likely ultimately recoverable resource of oil by category, and applied the ‘mid-point’ principle to determine the date of peak production. We examine Hubbert’s forecast for the date when production of US lower-48 states conventional oil, excluding deep offshore, would reach its resource-limited maximum and then decline; and his forecast for when global production of conventional oil would likewise reach resource-limited maximum and decline. While global production of conventional oil has been on plateau since 2005, rather than in decline as Hubbert forecast, both these forecasts were essentially correct and help explain the main changes in the price of oil over the last near-century. Had Hubbert’s forecasts been given the attention they deserved, they could potentially have lessened the global tensions associated with the 1970s price shocks, mitigated the oil-supply concerns of the two decades following, and helped avoid the worst consequences of the 2008 financial crisis. Hubbert’s methodology is still applicable today and provides an understanding of current global oil supply, and hence of one of the main drivers of oil price going forward. Commercial oil industry data supporting these findings are given in Supplementary Information.