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CALIFORNIA, USA - APRIL 14: A view of oil-well in action during sunset at Elk Hills Oil Field as gas ... More prices on the rise in California, United States on April 14, 2024. (Photo by Tayfun Coskun/Anadolu via Getty Images)
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The term "peak oil" has sparked debate for decades, fueling speculation, and more than a few forecasts of doomsday scenarios. But for all the noise, it remains a largely misunderstood concept. That’s unfortunate, because peak oil—both in theory and in practice—still carries serious implications for the global economy and energy markets.
The phrase was very popular 20 years ago but then faded when the shale revolution gathered steam. But all booms eventually end, and a growing number of voices are suggesting that peak production in the U.S. may soon be upon us.
What is Peak Oil?
But let’s begin with the basics. "Peak oil" doesn’t mean we are running out of oil. It means that we have hit a maximum level of oil production, and after that point, production begins to decline.
The concept was popularized in the 1950s by geophysicist Shell M. King Hubbert, who predicted that U.S. oil production would peak around 1970. That prediction was initially correct, but it didn’t account for the eventual surge in unconventional oil—especially from shale—which temporarily reversed that decline decades later.
Still, Hubbert’s basic framework held up well: oil fields follow a bell-shaped curve. Production rises, peaks, and then drops. It’s not hard to understand why. As the easiest, most accessible oil gets pumped out, the remaining oil is harder to reach, more expensive to produce, and often requires new technologies or techniques. This is simply a resource depletion issue.
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