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Peak Oil Predictions

April 4, 2013

Econbrowser takes a look at a pair of predictions on oil production from the middle of the last decade.  T. Boone Pickens was pessimistic on oil production, believing the long claimed “peak” had arrived and that production would necessarily decline in coming years.  Daniel Yergin, on the other hand, was an optimist and believed that we might experience as much as a 20% increase in production.  Neither, of course, has been correct – oil production has increased slightly in the intervening years, but nothing like that predicted by Yergin.

I think they were both off the mark for different reasons.   Pickens failed to foresee the technological changes that would enable increased production from formerly declining fields (also, we must remember that Pickens might not have fully believed his own predictions – he was pimping his “Pickens Plan” that sought government subsidies for wind farms and natural gas production, from both of which he stood to profit).  At the same time, Yergin overstated the pace of technological advancement (as have I, by the way) and also underestimated the role of political peaking – the ability of various forces (both pro and anti oil) to use the political system to slow down oil production.   Unfettered by politics, there probably is enough fossil fuel in the ground for a 20% or greater increase in production.  On the other hand, of course, fully realizing that increase will also require a policy choice that will necessarily involve politics.

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