Peak oil
Some observers, such as petroleum industry experts Kenneth S. Deffeyes and Matthew Simmons, predicted there would be negative global economy effects after a post-peak production decline and subsequent oil price increase because of the continued dependence of most modern industrial transport, agricultural, and industrial systems on the low cost and high availability of oil. Predictions vary greatly as to what exactly these negative effects would be. While the notion that petroleum production must peak at some point is not controversial, the assertion that this must coincide with a serious economic decline, or even that the decline in production will necessarily be caused by an exhaustion of available reserves, is not universally accepted.
By observing past discoveries and production levels, and predicting future discovery trends, the geoscientist M. King Hubbert used statistical modelling in 1956 to predict that United States oil production would peak between 1965 and 1971. This prediction appeared accurate for a time however during 2018 daily production of oil in the United States was exceeding daily production in 1970, the year that was previously the peak. Hubbert used a semi-logistical curved model (sometimes incorrectly compared to a normal distribution). He assumed the production rate of a limited resource would follow a roughly symmetrical distribution. Depending on the limits of exploitability and market pressures, the rise or decline of resource production over time might be sharper or more stable, appear more linear or curved. That model and its variants are now called Hubbert peak theory; they have been used to describe and predict the peak and decline of production from regions, countries, and multinational areas. The same theory has also been applied to other limited-resource production.
Energy demand is distributed amongst four broad sectors: transportation, residential, commercial, and industrial. In terms of oil use, transportation is the largest sector and the one that has seen the largest growth in demand in recent decades. This growth has largely come from new demand for personal-use vehicles powered by internal combustion engines. This sector also has the highest consumption rates, accounting for approximately 71% of the oil used in the United States in 2013. and 55% of oil use worldwide as documented in the Hirsch report. Transportation is therefore of particular interest to those seeking to mitigate the effects of peak oil.
Some analysts argue that the cost of oil has a profound effect on economic growth due to its pivotal role in the extraction of resources and the processing, manufacturing, and transportation of goods. As the industrial effort to extract new unconventional oil sources increases, this has a compounding negative effect on all sectors of the economy, leading to economic stagnation or even eventual contraction. Such a scenario would result in an inability for national economies to pay high oil prices, leading to declining demand and a price collapse.
Conventional oil is extracted on land and offshore using standard techniques, and can be categorized as light, medium, heavy, or extra heavy in grade. The exact definitions of these grades vary depending on the region from which the oil came. Light oil flows naturally to the surface or can be extracted by simply pumping it out of the ground. Heavy refers to oil that has higher density and therefore lower API gravity. It does not flow easily, and its consistency is similar to that of molasses. While some of it can be produced using conventional techniques, recovery rates are better using unconventional methods.
