The Hubbert curve is a method for predicting the likely production rate of any finite resource over time. When charted, the result resembles a symmetrical bell-shaped curve.
The theory, introduced in the 1950s, initially described the production cycle of fossil fuels but has since become applicable to any finite resource.
Key Takeaways
- The Hubbert curve predicts the production rate of finite resources.
- Developed in 1956 to explain fossil fuel production rates.
- Now used across various resource sectors, influencing debates on global oil production rates.
How the Hubbert Curve Works
The Hubbert curve was proposed by Marion King Hubbert in 1956 during his presentation to the American Petroleum Institute titled “Nuclear Energy and the Fossil Fuels.” Initially focusing on fossil fuels, the model gained acceptance for projecting the production rates of natural resources more broadly.
Key to investors is the Hubbert curve’s prediction of when resource production will peak. Initiating a new project, such as an oil well, requires substantial upfront costs before yielding a marketable product. This includes drilling, gaining essential equipment, and covering personnel costs. Once the necessary infrastructure is in place, production volumes rise gradually before eventually declining as resources deplete.
Hubbert’s model incorporates factors such as a well’s natural reserves, probability of oil discovery, and extraction speed, to predict the point of maximum production. This peak occurs just before depletion triggers a decline in production rates.
Real World Example of the Hubbert Curve
Hubbert’s model performs consistently well for both individual projects and large regions. The Hubbert curve can describe global oil output and regional production in places like Saudi Arabia or Texas. The model’s appearance and predictions remain strikingly accurate across these cases.
While real-world production may not follow a perfect curve, the Hubbert curve is a close approximation. A notable application is the Hubbert Peak Theory, predicting global peak oil production.
Industry analysts believe the United States reached its peak oil production in the 1970s, yet consensus on the global peak is inconclusive. Continued innovations in oil extraction technologies may have postponed the production decline indefinitely.
Related Terms: Production Rate, Bell-Shaped Curve, Natural Resources, Peak Oil, Investment Costs.
References
- National Academy of Sciences. “M. King Hubbert”.
