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Data: EIA; Chart: Axios visuals

Fifteen years ago, the world was worried it would run out of oil, yet this week the crude market cratered, with prices for American oil temporarily going negative.

The big picture: While the recent price crash is largely due to unprecedented drops in demand for oil because of COVID-19 lockdown policies, technological advances over the past decade unlocked new supplies in the U.S. and elsewhere.

  • The result is an oil glut that could keep prices low for years.

Background: The idea that the world would eventually run out of oil was prominently put forward by an American geologist named M. King Hubbert who predicted in 1956 (mostly accurately) that U.S. oil production would peak in the early 1970s. The theory received a boost in 1998 when Scientific American published an influential article by a pair of geologists arguing that global oil production would soon be unable to keep pace with rising demand.

  • In the years that followed, global oil prices kept rising, eventually passing $100 a barrel in early 2008.
  • The increase in prices, as well as projections of future decline in production in countries like the U.S., led to fears the world was approaching "peak oil," after which supplies would inevitably decline, prices would skyrocket and economic collapse would follow.

But, but, but: The opposite happened. The fracking revolution, which allowed oil companies to drill for new supply in places like western Texas and North Dakota, inverted projections like the one in the chart above. U.S. oil production began rising, adding millions of barrels a day to the global market.

  • By September 2018, the U.S. passed Russia and Saudi Arabia to become the world's biggest oil producer, and by the following year, the country was a net petroleum exporter.

What's next: It's a bad time to be in the oil business, but the world is a long way from getting off crude, with global demand passing 100 million barrels a day before the COVID-19 crisis. Still, with alternative energy and electric vehicles on the rise, it's not impossible to imagine the true peak oil we could be facing is peak demand, not peak production.

The bottom line: Unexpected technological change reliably overthrows our predictions about the future — which doesn't stop us from making them.

Go deeper

Ben Geman, author of Generate
Jul 30, 2020 - Energy & Environment

Oil giants Shell and Total report profits despite staggering earnings declines

Photo: Patrick Pleul/picture alliance via Getty Images

Shell and Total SA announced mammoth earnings declines Thursday that reflect the pandemic's toll on energy prices and demand, but the companies nonetheless beat expectations and eked out profits.

Driving the news: Shell announced second-quarter adjusted net earnings of $638 million, an 82% decline from the same period last year.

18 mins ago - Economy & Business

Clean trucks are paving the road to the electric vehicle era

Illustration: Eniola Odetunde/Axios

The electric vehicle revolution is underway, led by the un-sexiest of plug-in models: the commercial truck.

Why it matters: Growing demand for cleaner trucks means 2021 will be a pivotal year for electric vehicles — just not the kind you might have expected.

Dion Rabouin, author of Markets
3 hours ago - Economy & Business

The fragile recovery

Data: Department of Labor; Chart: Axios Visuals

The number of people receiving unemployment benefits is falling but remains remarkably high three weeks before pandemic assistance programs are set to expire. More than 1 million people a week are still filing for initial jobless claims, including nearly 300,000 applying for pandemic assistance.

By the numbers: As of Nov. 14, 20.2 million Americans were receiving unemployment benefits of some kind, including more than 13.4 million on the Pandemic Unemployment Assistance (PUA) and Pandemic Emergency Unemployment Compensation (PEUC) programs that were created as part of the CARES Act and end on Dec. 26.

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