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Modeling Peak Oil

Stephen P. Holland

Year: 2008
Volume: Volume 29
Number: Number 2
DOI: 10.5547/ISSN0195-6574-EJ-Vol29-No2-4
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Abstract:
Peak oil refers to the future decline in world production of crude oil and to the accompanying potentially calamitous effects. The majority of the literature on peak oil is non-economic and ignores price effects even when analyzing policies. Unfortunately, most economic models of depletable resources do not generate production peaks. I present four models which generate production peaks in equilibrium. Production increases in the models are driven by: demand increases, cost reductions through advancing technology, cost reductions through reserve additions, and production capacity increases through site development. Production decreases are driven by scarcity. The models do not rely on market failures and indicate that a peak in production may arise from efficient intertemporal optimization. The models show that prices are a better indicator of impending scarcity than peaking is and that peak production can occur when any percentage from 0-100% of the original deposit remains.



Prediction and Inference in the Hubbert-Deffeyes Peak Oil Model

John R. Boyce

Year: 2013
Volume: Volume 34
Number: Number 2
DOI: 10.5547/01956574.34.2.4
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Abstract:
The Hubbert-Deffeyes "peak oil" (HDPO) model predicts that world oil production is about to enter a period of sustained decline. This paper investigates the empirical robustness of this claim. I use out-of-sample methods to test whether the HDPO model is capable of estimating ultimately recoverable reserves. HDPO model estimates of ultimately recoverable reserves, based on data available 30 years or more in the past, are found to be less than current observed cumulative production and discoveries. This result is robust to different specifications of the HDPO model, to applications to production and discoveries data, and to various levels of geographical aggregation. These problems stem from an attempt by the HDPO model to force a linear relationship onto data which are inherently nonlinear. This characteristic of the data is present in a wide variety of natural resources. I also show that the HDPO model is incapable of distinguishing between processes for which cumulative production is truly finite and processes for which cumulative production is unbounded. These findings undermine claims that the HDPO model is capable of yielding meaningful measures of ultimately recoverable reserves or of predicting when world oil production might peak.





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