Peak Oil

The world has finite resources of oil (as well as gas, coal and other fossil fuels). World oil production has risen rapidly over the last 100 years, in line with population growth and economic growth. However, production from individual countries, such as the USA, UK or Norway, has peaked - that is to say, it has levelled off and then declined. For example, the UK's North Sea production peaked in 1999 and is currently reducing at the rate of about 8% per year.

Production from other countries is bound to peak in the same way, and therefore total world oil production must also peak and then decline. There is a degree of disagreement as to when this will happen, but even the most optimistic forecasts put it no more than 20 years into the future. Careful analysis of reserves and actual production, country-by-country, by organisations like ASPO suggests that it is much more likely that the peak is imminent.

Indeed, there is evidence to suggest that we may already be at peak production. For example, data for total world oil production from the US Government's Energy Information Administration shows that production has been almost constant from 2005 through 2007. While it is possible that this is a temporary lull on an otherwise upward curve, putting it together with the findings of ASPO and others suggests a more credible interpretation is that the current "plateau" is indeed the final peak, and that world production can only turn downwards from now on.

As a result of the growing shortfall of oil supply compared to rapidly-rising demand, the price of crude oil is rising rapidly. On 5 May 2008 it crossed $120 per barrel. This is twice the price of spring 2007, just over one year previously, and six times the price of $20 that prevailed through much of the 1990s and up to 2002. Credible commentators - including recently the president of OPEC - have speculated that the price may rise to $150 or even $200 per barrel during 2008 or 2009. In fact, the laws of supply and demand are such that the price must keep rising until somebody somewhere starts to use less oil. And if oil supply does indeed start to fall - and this could be at a rate of 4% per year or so worldwide - the price will only be kept in check if we can all cut our oil consumption at that same rate.

What are the implications of this shortage of oil, and the rising oil price, for our everyday lives? Some examples include: