Send me some e-mail so I can tell you how you might respond to the paper in the future -- after I have read it.

In this paper, we establish an empirical model for oil production in the lower 48 states that represents its economic, physical, and institutional determinants. We estimate a vector error correction model for oil production in the lower 48 states that specifies real oil prices, average production costs, and prorationing by the Texas Railroad Commission. These modifications enable us to generate a model that accounts for most of the variation in oil production in the lower 48 states between 1938 and 1991. The result that oil production in the lower 48 states shares stochastic trends with real oil prices, average production costs, and prorationing indicates that accuracy of Hubbert's bell shaped curve is fortuitous. The importance of these factors also indicates why the basic Hotelling model cannot replicate the production path for oil in the lower 48 states. This inability is critical. The negative economic effects associated with high prices and energy shortages imply that the importance of inconsistencies with the basic Hotelling model identified by this analysis may be sufficient to warrant a greater degree of government intervention in the transition from oil than is currently envisioned by most policy makers.

-- Dave

You might do a Google search "Central Limit Theorem Hubbert" and look through some papers that talk about Hubbert modeling failures or constraints on this kind of modeling. From Roberto --

Click to Enlarge
The "double peak" in the UK disappears
after the big North Sea fields smooth
out and there is a more normal distribution

Stuart and Khebab have pointed out at the possibility of the central limit theorem applying to oil production to give a normal distribution. But what I am saying is that the central limit theorem does not apply at all well directly, because there are a few fields that are much larger that the rest and have been discovered very early. If you leave out these aberrations first, the central limit theorem will work much better, and will give you something close to a normal distribution.

Generally, people concerned about peak oil production are vulnerable to various critiques of Hubbert modeling unless they have taken the time to study the model in some depth. Having stared at quite a few production curves, it becomes obvious that reality is more complex than a bell curve. Hope this helps.

Basically they showed they could predict or reproduce U.S. oil production levels from the 1930s through 1990s, using just 3 factors: the price of oil; the cost of oil production; and the allowed limits on oil production enforced by the Texas Railroad Commission, a de facto cartel operating up through the early 1970s. The resulting model predicts oil production far more accurately than does the Hubbert bell curve.

This is nice work as far as it goes, but at some level it is just statistics, as they don't go deeper to discuss what this means in terms of oil production in other areas and times. And further, this new paper is not necessarily inconsistent with Hubble's basic insight about geology eventually limiting production levels.

Consider for example the Texas RRC limit, which was steadily raised until it finally hit 100% in the early 70s. Yes, you can say this explains why oil production was rising during this time. Statistically the correlation is there - the allowable production levels were increasing, and sure enough, production was increasing too. But from the larger perspective, if we ask why the Commision was raising production limits, that was due to growing demand and supply factors. The Commision did not operate in a vacuum, it made its decisions based on economic and geologic forces. Well, that's implicitly how the Hubbert curve works too (at least how I interpret it) - the upswing is due to economic factors, investment and development and growth; and the peak and downturn is due to geologic limitations. So the operation of the Commission can be seen as part of what makes the Hubbert curve work.

Another similar effect is their use of cost of oil production as a component of the model. Obviously as we get towards the down side of the Hubbert curve, oil production is much more difficult and costly. So yes, if you include oil costs in your model, you again can explain why oil production declines after a while. This is not inconsistent with the Hubbert curve, but rather it is another way of looking at the same effect.

The point is then that just because you can get a good prediction from these three factors, that's not necessarily inconsistent with the basic soundness of the Hubbert curve as a somewhat crude model. Everyone knows that the Hubbert curve is not perfect, but the fact remains that it does pretty well considering what a simple model it is.

Cry Wolf BSc PhD

Go to the Energy Bulletin and search under authors for Jeffrey Brown.   There are several artitles there on the HL technique, based on Khebab's technical work.  I would recommed the Hubbet's Lower 48 Prediction Revisted.