Exxon Mobil Says Peak Oil Unlikely in the Next 25 Years

First, here is a fast summary of Peak Oil. “Peak Oil” is a shorthand way of describing a “peak” in mankind’s ability to extract conventional oil from the crust of the Earth due to certain absolute limits on the petroleum resource base. In other words, you cannot extract oil that does not exist or that has not been discovered.

The Oil Age commenced in 1859, ushered in by the establishment of the Drake well in Titusville, Pa. For the past 15 decades, people have been getting better and better at lifting conventional oil out of the ground. We have progressed to the point where, in the past two years, daily global oil production has hovered around 81-82 million barrels per day (b/d), plus the 3-4 million b/d of natural gas liquids and synthetic crude from Canadian tar sands. Hence you often read of current world oil output of about 85 million b/d. If you follow the production curve back over the years, you will see that oil output has risen steadily almost every year over the past century, with some interruptions by the Great Depression, World War II and, more recently, the Iranian Revolution in the late 1970s. But now, in the past year or so, it appears that world daily output has reached some sort of peak or plateau.

Exxon Mobil’s (NYSE: XOM) position is to disagree that the current state of affairs represents any sort of present or imminent “peaking” in world oil output. In fact, Exxon’s stated position is this:

“A peak in petroleum liquids production, resulting solely from resource limitations, is unlikely in the next 25 years. Predictions of an imminent peak based on [the methodology developed by Shell Oil Co. geologist M. King Hubbert] in 1956 do not adequately account for resource growth from application of new technology, knowledge and capability, which combine to increase recovery, open new producing areas and lower economic thresholds.

“Supplies from OPEC and non-OPEC countries, gas-related liquids and unconventional resources are growing. Furthermore, nations with the largest remaining resources produce under long-term restraints not envisioned in Hubbert’s method. The ultimate peak in petroleum production may result from factors other than resource limitations.”

Exxon Mobil forecasts an increase in demand for petroleum liquids from about 85 million b/d in 2006 to 115 million b/d in 2030, or average growth in demand of about 1.2 million b/d per year. Worldwide, over the next 25 years, the ability of the petroleum industry to meet this demand will depend, in great measure, on what Exxon calls “adequate access to petroleum resources.” This latter term includes ensuring that the oil industry has access to drill in areas not previously explored or exploited, such as geographically or politically isolated areas, as well as areas of deep water or extreme climate, that require the development of new technology.

Exxon Mobil challenges the Hubbert methodology on two fronts. Hubbert’s methodology rests on two interconnected assumptions. First, the methodology assumes that the size of the ultimate resource base can be known with some degree of accuracy. And second, the methodology assumes that the peak in production occurs when approximately 50% of that resource base has been extracted. According to Exxon Mobil, “An analysis of resource assessments and production history suggests that neither assumption is necessarily valid.”

First, “there appears to be a systematic bias that underestimates the size of the resource base by ignoring the future increase in recoverable volume.” That is, new petroleum discoveries, plus what is called “reserve growth” continue to add to the original resource base, thus pushing the extraction and decline curves out to future years.

Second, if the ultimate size of the resource base is systematically underestimated, it is not possible to state when 50%, or anything near that percentage, of the oil resource has been extracted.

The Exxon Mobil thesis is that Hubbert’s methodology worked when he applied it to the U.S. as an oil province, because the U.S. was extensively explored during the time period that covered Hubbert’s career. “Hubbert’s 1956 prediction turned out to be right; lower-48 U.S. production peaked in 1970,” just as he said it would, according to Exxon Mobil. But Exxon Mobil criticizes attempts to extend the application of what it characterizes as Hubbert’s “simple approach” to the entire world. And due to a misunderstanding of the Hubbert approach and its misapplication to a poorly defined world resource base, “a popular view has emerged that the world faces an imminent decline in global liquids production resulting from depletion of resources.”

Thus, according to Exxon Mobil, “the Peak Oil theory has raised questions about the future of the oil and gas industry, how resources are estimated, the current supply situation, the role of technology and other factors in determining future supply.”

Most previous estimates of a peak in oil extraction have been wrong, noted Mr. Vierbuchen. For the most part, these previous estimates “missed the concept of reserve growth,” which refers to the process by which the initial identified reserves of an oil province “grow” over time as new drilling and new knowledge make it apparent and quantifiable that there is more oil down there than was first thought.

There are numerous examples of new technology, as well as novel ways of thinking, that have and will in the future contribute to reserve growth. First, the more wells that are drilled in any region, the better the geological control over that region. More wells equals more knowledge of the exact types and depths of rocks, as well as subsurface structures and rock and reservoir conditions. This greatly facilitates expanding the resource base.

Second, new advances in seismic processing have given geologists better imagery of the subsurface. It is now possible to identify features that were formerly simply unknown and unknowable with previous technology. Even with older seismic methods, these features were indecipherable on the best of days. This new look from seismic processing facilitates improved reservoir modeling and better well placement.

In addition, new drilling techniques have enabled geologists and engineers to “extend” their reach, in terms of vertical depth and horizontal distance from the surface wellbore, and into certain identifiable “sweet spots” that were formerly the province of pure chance.

Once a well is completed, there are new methods to stimulate production, over and above classical pressure-maintenance techniques such as water flooding. These include new methods to fracture the reservoir rock and increase the surface area of rock face, from which oil can migrate toward the borehole. The new methods include advanced chemical mixtures that can dissolve the rock matrix, as well as enhance the oil recovery with chemicals such as “surfactants” that essentially wash the oil out of the rock pores.

In essence, the new technology that is expanding the petroleum resource base is a function of many truly novel scientific and engineering developments, coupled with economic incentive to apply resources to the unique problems of every oil province, and every oil field in that province. “There was never an age of ‘easy oil,'” Vierbuchen said, a statement with which almost every head in the room was nodding in agreement.

One of the greatest constraints on future oil production, according to Exxon Mobil, is the political fact that much of the world is essentially “off-limits” to exploration and production. These limitations vary from region to region and from country to country, but cumulatively, have a potentially large negative effect on future oil output.

In the U.S., large areas onshore, and essentially all of the offshore areas outside of the western Gulf of Mexico and parts of Alaska, are off-limits to new drilling. In the U.K., the government has just raised tax rates to an onerous level that will inhibit future exploration in the North Sea. Issues of resource nationalism in nations from Russia to Venezuela are making future investment by any but the national oil companies (NOCs) – or politically favored outsiders – problematic. War in Iraq is preventing almost any petroleum development at this time. Insurrection in Nigeria makes for tough going in that part of the world. And the list goes on.

At the end of the argument, however, Exxon Mobil is not stating that there will never be a peak in rates of oil extraction. Instead, the company is arguing that any valid predictive methodology should properly place that event 25 or more years in the future. Specifically: “It does not follow that there is unlimited potential for production growth, rather that the eventual peak in global production is likely to be much further in the future than is commonly suggested.”

Exxon Mobil also notes that “it is possible that the peak, when it occurs, may result from a cause other than resource limitation (e.g., government policies, lack of access to existing resources, competition from alternative energy sources, improvements in energy efficiency).”

So Exxon Mobil is not claiming that there is no Peak Oil problem. It is just a question of timing and time frames, and according to the world’s largest publicly traded oil company, the time for Peak Oil is not now or in the immediate future. To the extent that there is an oil supply problem anywhere on the near horizon, the Exxon Mobil view is that it derives from limited access to prospective regions and under-investment in exploration, development and other related extractive infrastructure. To the extent that prices are rising, it is because global demand for liquid hydrocarbon has been strong and growing, particularly in the developing world, and certainly in China and India.

Whether Mr. Vierbuchen and Exxon Mobil are correct or wildly incorrect about the timing of a peak in world oil production is something that many of us will probably live to see.

Byron W. King
for Markets and Money

Byron King

Byron King currently serves as an attorney in Pittsburgh, Pennsylvania. He received his Juris Doctor from the University of Pittsburgh School of Law in 1981 and is a cum laude graduate of Harvard University. Byron is also co-editor of Outstanding Investments.

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24 Comments on "Exxon Mobil Says Peak Oil Unlikely in the Next 25 Years"

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Allen Crider
I can’t imagine why Exxon is taking this tack. It will surely lead to windfall profits taxes being passed on them. It is also odd they’re invoking reserve growth as the reason peak isn’t near. The US peaked in 1970 and has been declining ever since, despite of reserve growth! How can they argue with the US Energy Information Agency’s figures which show the world peaked in May, 2005? How can they argue with the Middle East Economic Survey which shows that OPEC peaked in November, 2004? Exxon offers no contradictory figures, yet assures us (or themselves?) of ever-increasing plenty!… Read more »
Guy Fleegman

If a peak in production has not been reached, then why is there a price spike when a relatively small (50,000 b/d, http://www.kswo.com/Global/story.asp?S=6455697) refinery is shut down due to a fire? Why not just crank up production from another location to make up for it? And with future demand projected at 130 million b/d, why have no new refineries been built in the U.S. since 1976?

And then they cite “under-investment in exploration.” Are we to understand that Exxon-Mobil’s record-breaking profits are not adequately being applied toward more exploration?

Excuse me if I have doubts about the validity of their optimism.

Guy Fleegman

One more thing. Hubbert was ridiculed and dismissed as a crackpot in 1956 when he predicted peak U.S. production would occur in 1970. It turned out he was right. Now his predictions are being scorned and dismissed again. Do I detect a pattern here?

William Woolmer
Exxon HAVE to argue that the peak is distant. Their current market, environemnt and therefore profits depend on a she’ll-be-right attitude accross the world. but bno amoutn of technology and cleverness will INCREASE the amount of oil under the earth. The time for that is past – about 90 million years ago! Improved technologies only speeds up the problem – super straws sucking the remaining oil out faster, nearing the impending shortage crisis. No need to look to Hubbert and the 1950s – look to the huge raft of current senior petroleum geologists who professionally estimate a world extraction peak… Read more »
Mike Quinn

Hubbert did in fact address advancing technology (read his speech which can be found on-line). He said that new technologies would only serve to make the decline less steep…

Oil *discoveries* peaked in the U.S. in the 1930’s and production peaked here ~1970. World oil *discoveries* peaked in the 1960s and have declined each and every decade since, irregardless of what new technologies are brought to bare…

Discovery and extraction technologies do improve, but not enough to offset declines in production from existing fields nor to meet increasing demand…

Phil Hart

For those wanting to explore peak oil further, the Australian Association for the Study of Peak is hosting the opening night of a new peak oil movie in Melbourne on Tuesday 5th June. Details and national release dates on our website:


If you come and see it, you’ll be less surprised when petrol reaches $1.50/litre!


Markus Hallum

Exxon’s profits depend on the *price* of oil. If Exxon truly believed the peak were past, it would actually make sense for them to admit it: oil prices would rise even faster!

Their optimism (if one wants to call it that) is based on the historical record: when prices rise, demand drops and supplies increase.

Right or wrong, it’s a more solid foundation for predicting the future than the assumption that “half of all there is” was pumped in May 2005.

Markus Hallum

By the way, I am well-read in the Peak Oil theory; I simply find it lackluster because it doesn’t take price into consideration.

Richard Bergin

Who are you going to believe on Peak oil? The people selling the stuff to get rich or the academics and experts that have nothing to gain and in some cases a lot to loose by highlighting this crisis? It takes a lot of guts to point out that our oil dependant society is screwed, especially when most academics are so conservative by nature

Brad Jones
Interesting to see the term “Peak Oil” manipulated and obscured by XOM in this article. XOM may be right and we may not reach 50% pumped for another 25 years, however peak “production” is actually left quite open in this article. Peak Oil generally refers to peak “prodcution” and whether or not that is brought about by environmental limitations (reserves) or external factors (nationalism of resources being the most significant) is not relevant. A decline in “production” in the face of rising demand is unlikely to bode well for the economy at large and less likely to bode well for… Read more »
Greg W

If Peak were true, then wouldn’t governments be clamouring to encourage alternative energy sources? Wouldn’t car manufacturers want to develop electric or hydrogen hybrids?
If Peak were true, Exxon would want to assure us that we don’t need to buy alternatively fueled cars, that there was no reason for the consumer to participate in this market.
If Peak were true…


Read below. Isn’t it great how the same company takes both sides of the issue?

“Exxon boss calls end of non-OPEC growth by 2010
Posted on Friday, June 22nd, 2007

Big beasts of the oil jungle don’t come much bigger than Rex Tillerson, in London last week to give a speech at Chatham House. Usually at such events the bigger the beast the duller the platitudes, but during questions afterwards the CEO of ExxonMobil made some significant remarks that underscored the tightness of oil supply outlook, and effectively predicted the end of non-OPEC oil production growth by 2010.”



Peak oil production is still decades away. It will fall into the laps of the next generation. However, time still runs out as well as oil, which makes the oil punters raise the price due to the promoted fear factor. Nice work if you can get it. Even though we now pay an artificial price for energy, at least it may encourage quicker development of other means to replace the true oil shortage when it comes.


I spoke recently to a former off-shore oil engineer who’d been chief engineer of a large oil exploration firm before retiring. His opinion was Peak Oil was here about now.

He said the world will have to shift to natural gas for transport, and should conserve petroleum for things like air transport. He was concerned at the slow pace of change in the world’s dependency on oil.


Article says more about a desire to keep a share price high than a desire to inform. Peak oil is here folks, natural gas and coal for more climate change, wind energy if we care about carbon dioxide.
Thats just the way it is.


Thomas Edison , the worlds greatest ever inventor, when he was alive, said that he hopes the world starts to develop and use solar energy BEFORE the oil runs out. Is anybody going to argue with the word of the worlds greatest ever inventor? I sure aint!


I really, really, wish that all of this could be solved by my sucking on my thumb and calling for mommmy.


Savings? Ha! Earnings? No chance. Note to self: let’s live a brief, but spectacular life!

Smack MacDougal
Folks don’t get what “Peak Oil” means. Peak Oil means thus: Right now, a fixed number of drilled wells exist and pump oil from the ground. Right now, a fixed number of roads, trucks, ports and ships exist to transport oil from drill sites to refineries. Right now, a fixed number of refineries exist to process shipped in oil. With the increase in incomes of BRIC folks — Indians, Chinese, Russians, Brazilians — in the face of RIGHT NOW output of oil and its refining, prices must go up, regardless of the debasement of the currency of any country. Is… Read more »
Americans Are Entering a Season of Food Hoarding

[…] how the problems of weird weather (climate change) combine and ramify the problems associated with Peak Oil. In this particular case they lead to an inflection point sometime around the 2008 harvest season, […]


No big deal, we’ll be dead and all this will rest on the backs of our children and grandchildren. Now or 25 years from now, it’s going o happen. 25 years is not that far away. When are we going to wake up ?


Today, 1st of January 2011, we can look at the article above and laugh!!! The International Energy Agency declared (FINALLY) that the peak in conventional oil had already occurred in… 2006!!! LOL! The U.S. economy is still just dragging itself along and West Texas crude is U.S.$92 a barrel!!! LOL In a couple of years you’ll be eating your grandchildren to stay alive, or they’ll be eating you! LOL

Exxon Predicts Half of New Cars Will Be Alternative-Fueled by 2040

[…] 2007, Exxon publicly rejected Peak Oil, the theory that the world has reached or will soon reach the half-empty mark of its […]

Rick in Afton

Seven years on, global production has risen, an oil surplus has developed, new technology has added reserves, and oil prices are on a downward trend. Looks like Vierbuchen and ExxonMobil were correct.

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