Peak oil refers to a hypothesis originated by M. King Hubbert in 1956. He accurately predicted that U.S. production would crest between 1965 and 1970. U.S. production topped at 9.4 MM barrels in 1970. His model, known as "Hubbert's Peak" suggests that a non-renewable resource will follow a roughly symmetrical bell-curve shape based on the limits of exploitability and market pressures.
Hubbert also predicted that world production would peak shortly after 2000. He was right. World oil production peaked in 2005 at approximately 85 MM barrels per day. However, given the unprecedented rise in oil prices in 2008, output slightly exceeded the prior peak as various countries like Saudi Arabia took unprecedented measures to boost production in order to keep prices from skyrocketing further. We know that the subsequent crash in oil prices caused production to be curtailed, so 2008 will prove to be the year of maximum oil production.
But, how do we know that production won't rise again as a result of the discovery of some major oil field?
Elementary, my dear Watson! There are no new fields large enough and close to production that could possibly offset the inevitable decline in the production of existing fields. In order for any field to begin production, it must first be found, drilled and delineated BEFORE any meaningful production occurs. That process takes many, many years. So, by the time a GIANT oil field comes into production, the existing fields will be well into decline and the new field will only slightly offset the decline.
What about synthetic crude such as Tar Sands or Oil Shale? At this time, neither are significant except to a few countries. Shale oil, touted as the next big thing has been known since the 1950's, yet no significant production from that source is in existence! It isn't a matter of price. Oil shale is "energy intensive", meaning that it requires a lot of energy to produce energy under current technology. Therefore price is meaningless!
Tar Sands are produced, especially in Alberta, Canada. However, current production is only 1.2 MM barrels per day.
The ONLY reason Peak Oil might be incorrect would be the belief that oil is renewable as some have argued. This argument is ridiculous! Air and water are renewable as they are both composed of gasses. In the case of water, Hydrogen and Oxygen, while air is composed primarily of Nitrogen and Oxygen. Crude Oil is composed of Hydrogen and Carbon, so it doesn't share similar properties.
Finally, the U.S. has known about Peak Oil for years, as Hubbert's predictions have turned out to be uncannily correct. We invaded Iraq in 2003. Wonder if there was a connection?
Tomorrow we'll continue our "Take" on Peak Oil.
Thanks for reading!