Annual Production with 2 Percent Growth Rates and Different Decline Methods
1. In this graph, the dotted line curve reflects the EIA methodology in which world oil production is assumed to grow at a rate of 2 percent per year until the ratio of reserves to annual production (R/P) declines to 10. (Reserves are computed from resource estimates using an algorithm which factors in annual finding and production rates.) At that point (the peak), world production is assumed to begin to decline in a way that maintains a constant R/P of 10. The global resource base shown is the mean USGS estimate, 3,003 billion barrels. Because the area under each production curve must be the same (equal to total resource base), a later peak results in a steeper decline rate, and vice versa. The estimated peak using this EIA methodology occurs in 2037.
2. The reason for setting R/P equal to 10 is based on the United States experience. The United States is a very mature producing country and has had an R/P ratio between 8 and 12 for the past 50 years. The R/P ratio was around 12 in the 1940ís and 1950ís, dropped below 10 in the 1960ís, was around 8 in the1970ís and 1980ís and has been around 10 in the 1990ís. Therefore, a world R/P of 10 seems a reasonable assumption to reflect a mature state of world oil production, as it does for the United States.
3. For reference, the current world R/P ratio is about 50, nowhere near 10 yet.