It is also true for the United States as a whole (including off shore drilling and Alaska). Oil production has also already peaked in dozens of other countries so there is a fear that eventually the world as a whole will peak and then go into irreversible decline. Given how dependent the world economy is on the use of oil for transportation and natural gas for energy production, this could have very serious consequences. There is a wide amount of disagreement on when that peak will occur. There are even those who dispute that there will be a peak, claiming instead that there will be an undulating plateau. The pessimists however, believe that oil could peak in the near future. Below is a scenario put together by the Association for the Study of Peak Oil and Gas (ASPO).

Although this phenomenon has been barely discussed in the mainstream media it has started to get attention at relatively high levels of government. There is a peak oil caucus in the house of representatives as well as a study by the GAO (Government Accountability Office). The GAO study demonstrates the extreme divergence of views that exist on when the World peak for oil production is expected to occur, as demonstrated by this figure lifted from the report:

• The Importance of Cheap Energy
• Source #1: David Goodstein, Physics Professor, California Institute of Technology
• Source #2: Matthew Simmons, Energy Investment Banker
• Source #3: Colin Campbell, Jean Laherrere and Kenneth Deffeyes, Petroleum Geologists
• Source #4: Kevin Phillips, Political Analyst, Author
• Source #5: Roscoe Bartlett, James Schlesinger, The GAO and the Congressional Peak Oil Caucus
• Critiques of Peak Oil
• Economists and Peak Oil

Is the world running out of oil?

The prospect seems unthinkable--mostly because the consequences, if true, would be unimaginable. Permanent fuel shortages would tip the world into a generations-long economic depression. Millions would lose their jobs as industry implodes. Farm tractors would be idled for lack of fuel, triggering massive famines. Energy wars would flare. And car-less suburbanites would trudge to their nearest big-box stores--not to buy Chinese-made clothing transported cheaply across the globe, but to scavenge glass and copper wire from abandoned buildings."

The world will soon start to run out of conventionally produced, cheap oil. If we manage somehow to overcome that shock by shifting the burden to coal and natural gas, the two other primary fossil fuels, life may go on more or less as it has been--until we start to run out of all fossil fuels by the end of this century. And by the time we have burned up all that fuel, we may well have rendered the planet unfit for human life. Even if human life does go on, civilization as we know it will not survive, unless we can find a way to live without fossil fuels.

In the 1950s, Shell Oil Company geophysicist M. King Hubbert predicted that the rate at which oil could be extracted from wells in the United States would peak around 1970 and decline rapidly after that. At the time, his prediction was not well received by his peers, but he turned out to be right. U.S. oil extraction peaked at about nine million barrels per day in 1970 and has been declining ever since. Today it's just a little under six million barrels per day. Oil companies now routinely use Hubbert's methods to predict future yields of existing oil fields.

Recently, a number of oil geologists have applied Hubbert's techniques to the oil supply of the entire world. They have each used different data, different assumptions, and somewhat different methods, but their answers have been remarkably similar. The worldwide Hubbert peak, they say, will occur very soon--most probably within this decade.' There are highly respected geologists who disagree with that assessment, and the data on which it is based are subject to dispute. Nevertheless, Hubbert's followers have succeeded in making a crucial point: The worldwide supply of oil, as of any mineral resource, will rise from zero to a peak and after that will decline forever.

Some say that the world has enough oil to last for another forty years or more, but that view is almost surely mistaken. The peak, which will occur when we've used half the oil nature made for us (see chapter 1), will come far sooner than that. When the peak occurs, increasing demand will meet decreasing supply, possibly with disastrous results. We had a foretaste of the consequences in 1973, when some Middle Eastern nations took advantage of declining U.S. supplies and created a temporary, artificial shortage. The immediate result was long lines at the gas stations, accompanied by panic and despair for the future of the American way of life. After the worldwide Hubbert's peak, the shortage will not be artificial and it will not be temporary...

...Some economists say that we don't need to worry about running out of oil, because while it's happening the rise in oil prices will make other fuels economically competitive and oil will be replaced by something else. But as we learned in 1973, the effects of an oil shortage can be immediate and drastic, while it may take years, perhaps decades, to replace the vast infrastructure that supports the manufacture, distribution, and consumption of the products of the twenty million barrels of oil we Americans alone gobble up each day.

One certain effect will be steep inflation, because gasoline, along with everything made from petrochemicals and everything that has to be transported, will suddenly cost more. Such an inflationary episode will surely cause severe economic damage--perhaps so severe that we will be unable to replace the world's vast oil infrastructure with something else. That's a prospect we would rather not think about.

We are faced with a grave crisis that may change our way of life forever. We live in a civilization that evolved on the promise of an endless supply of cheap oil. The era of cheap oil will end, probably much sooner than most people realize...

...Once Hubbert's peak is reached and oil supplies start to decline, how fast will the gap grow between supply and demand? That is a crucial question, and one that is almost impossible to answer with confidence. We can make a crude attempt at guessing the answer as follows: The upward trend at which the demand for oil has been growing amounts to an increase of a few percent per year. On the other side of the peak, we can guess that the available supply will decline at about the same rate, while the demand continues to grow at that rate. The gap, then, would increase at about, say, 5% per year. That means that, 10 years after the peak, we would have to have a substitute for close to half the oil we use today, something approaching 10-15 billion barrels per year. Even in the absence of any major disruptions caused by the oil shortages after the peak, it is very difficult to see how that can possibly be accomplished.

Economists tell us that there can never be a gap between supply and demand because the process is regulated by price. That's never been true in the case of oil, because it has always been controlled by cartels, first in Texas and later by OPEC. However, once the peak occurs, OPEC will lose control of the situation, and the price mechanism will kick in with a vengeance.

As oil becomes a scarce resource, its use will have to be rationed in one way or another. There are ways to allocate oil use and direct it to its most valuable applications. But achieving such a rational plan will require a carefully orchestrated, global, country-by-country effort. Left unattended, this process could quickly evolve into genuine chaos. The global economy can function after oil supplies peak, but not in the same manner in which we live today.

This is a book about Saudi Arabia's oil. It analyzes the present condition of the Saudi Arabian oil exploration and production industry, and it details the real story about the small number of rapidly aging giant and super-giant fields that account for almost all the oil produced within the Kingdom. It asks, as a matter of greatest urgency, whether Saudi Arabia will be able to deliver over the next several decades the oil supplies that the world's consuming nations have come to depend on.

For years, every important energy supply model has assumed that Saudi Arabian oil is so plentiful and can be produced so inexpensively that its supply is expandable to any realistic demand level the world might need, at least through the year 2030. Many widely respected supply models (such as those used by United States government energy planners and the International Energy Agency) assume that Saudi Arabia will be producing as much as 20 to 25 million barrels of oil a day within the next two to three decades. In reality, the Kingdom's demonstrated production capacity in 2004 was on the order of 10 million barrels a day--in other words, one-half of the estimate...

...That Saudi Arabia's oil is important to the world is beyond any dispute. But this is one of the few facts, claims, and assumptions about the Saudi oil industry that requires no further scrutiny. Despite the importance of Saudi Arabia's oil to the well-being of the global economy, amazingly little is known about the details of the Kingdom's exploration and production industry. details urgently needed to support its seemingly extravagant resource claims. Field-by-field production reports disappeared behind a wall of secrecy over two decades ago. Information about the contribution that each field makes to the reported 261 billion barrels of proven Saudi Arabian oil reserves is treated as a state secret. It is not even clear how much oil Saudi Arabia actually produces since announced surges and cut-backs in production in recent years have rarely shown up in reports of oil imports from the Kingdom made by the member nations of the Organization for Economic Cooperation and Development (OECD) the recipients of by far the greatest bulk of the oil produced by Saudi Arabia and the other petroleum exporters.

This book tells a story about Saudi Arabia's oil that differs sharply from the official Saudi version. Instead of the oil abundance of the official version it argues that Saudi Arabian production is at or very near its peak sustainable volume. (if it did not, in fact, peak almost 25 years ago). and is likely to go into decline in the very foreseeable future. There is only a small probability that Saudi Arabia will ever deliver the quantities of petroleum that are assigned to it in all the major forecasts of world oil production and consumption. Crucial to the story this book tells is a body of technical information about Saudi Arabia's aging giant oilfields that explains the real nature of the threat to the Kingdom's oil production capability. This in turn exposes the risk that the world might soon witness the fading of Saudi Arabia's oil supply, an event that would also mark the ultimate peaking of global oil supplies, just as demand is beginning to increase substantially in many countries.

The "twilight" of Saudi Arabian oil envisioned in this book is not a remote fantasy. Ninety percent of all the oil that Saudi Arabia has ever produced has come from seven giant fields. All have now matured and grown old, but they still continue to provide around 90 percent of current Saudi oil output. The Kingdom's three most important fields have been producing at very high rates for over 50 years. High-volume production at these key fields, including the world's largest, has been maintained for decades by injecting massive amounts of water that serves to keep pressures high in the huge underground reservoirs and also to sweep the mobile, more easily recoverable oil toward the producing wells. When these water injection programs end in each field, steep production declines are almost inevitable.

I could figure it out ten years ago, and publicly spoke out and wrote written reports that I can go back and point to that said the North Sea is likely to peak between 98 and 2000. And I threaded the needle pretty well because it peaked in 99 because we had field-by-field production data.

COLIN J. CAMPBELL and JEAN H. LAHERRERE have each worked in the oil industry for more than 40 years. After completing his Ph.D. in geology at the University of Oxford, Campbell worked for Texaco as an exploration geologist and then at Amoco as chief geologist for Ecuador. His decade long study of global oil-production trends has led to two books and numerous papers. Laherrere's early work on seismic refraction surveys contributed to the discovery of Africa's largest oil field. At Total, a French oil company, he supervised exploration techniques worldwide. Both Campbell and Laherrere are currently associated with Petroconsultants in Geneva.

The next oil crunch will not be so temporary. Our analysis of the discovery and production of oil fields around the world suggests that within the next decade, the supply of conventional oil will be unable to keep up with demand.

This conclusion contradicts the picture one gets from oil industry reports, which boasted of 1,020 billion barrels of oil (Gbo) in "proved" reserves at the start of 1998. Dividing that figure by the current production rate of about 23.6 Gbo a year might suggest that crude oil could remain plentiful and cheap for 43 more years--probably longer, because official charts show reserves growing.

Unfortunately, this appraisal makes three critical errors. First, it relies on distorted estimates of reserves. A second mistake is to pretend that production will remain constant. Third and most important, conventional wisdom erroneously assumes that the last bucket of oil can be pumped from the ground just as quickly as the barrels of oil gushing from wells today. In fact, the rate at which any well--or any country--can produce oil always rises to a maximum and then, when about half the oil is gone, begins falling gradually back to zero.

From an economic perspective, when the world runs completely out of oil is thus not directly relevant: what matters is when production begins to taper off. Beyond that point, prices will rise unless demand declines commensurately.

Using several different techniques to estimate the current reserves of conventional oil and the amount still left to be discovered, we conclude that the decline will begin before 2010.

I have been privileged to take a look at Ken Deffeyes new book "Beyond Oil" and I can tell you the most impressive part of this book is not the part on what happens beyond oil, which is actually pretty good,but his wonderful, clear presentation for the case for the peaking of worldwide oil. I urge you to get a copy of this book and look at yourself and see if you can find any conceptual error in the presentation, because it leads you to this conclusion - that if we don't find another middle east size oil field richness over the next couple years, there is no way we are going to avoid peaking worldwide oil production in a year or so. With the incredible development of China and India and so forth, it is very clear to me that we have a huge problem just simply in the amount of energy regardless of where it comes from, independent of what I think is also a critical issue, global warming.

A short explanation of the "peak" concept is in order. Geologists define it as the point at which at least half of a field's reachable oil has been extracted. After this stage, getting each barrel out requires more pressure, more expense, or both. Output shrinks accordingly. After a while, despite nominal reserves that may be considerable, more energy is required to find and extract a barrel of oil than the barrel itself contains. By then, production becomes uneconomic--at least until the price of oil rises or the cost of extraction drops.

Although the experts do not agree how close world oil production is to its peak, pessimists believe that it is close, and even relative optimists see it only two or three decades away. Matthew Simmons, a Texas consultant who has advised George W Bush's White House, pinpointed the aging problem in a 2002 report, "The World's Giant Oilfields," for the Colorado School of Mines. The "120 largest oilfields produce close to 33 million barrels a day, almost 50 percent of the world's crude oil supply. The fourteen largest account for over 20 percent. The average age of these 14 largest fields is 43.5 years."' By 2004 Simmons and others were expressing concern that Saudi output might already have peaked --unconfirmable, of course, until seen later in the all-knowing rearview mirror.

Two thousand four was also the year that Royal Dutch/ Shell acknowledged overstating its oil and gas reserves by 20 percent, bringing a major plunge in its share price. British Petroleum had downgraded its production goals several times during 2002, said analysts, because it couldn't find enough oil in its existing fields.' To all the major oil companies, finding new production resources was a never-ending challenge. Jon Thompson, the president of ExxonMobil Exploration, wrote in a 2003 company publication, "We estimate that world oil and gas production from existing fields is declining at an average rate of about 4 to 6 percent a year. To meet projected demand in 2015, the industry will have to add about 100 million oil-equivalent barrels a day of new production. That's equal to about 80 percent of today's production level. In other words, by 2015, we will need to find, develop and produce a volume of new oil and gas that is equal to eight out of every 10 barrels being produced today."...

...even in these government circles, optimists put the peak of global oil production only a bit closer to the middle of the century--say, 2025 to 2035--than to its beginning. That still left the United States of 2025 in the difficult position of needing to import roughly three-quarters of an expected thirty million barrels per day of consumption. At the same time, environmental experts emphasized yet another aging process: the global climate change caused by twentieth-century manufacturing and energy consumption, which overloaded the atmosphere with carbon dioxide. An abrupt climate-change scenario, released by the Pentagon in 2003 but quickly disavowed by the White House, discussed the potential peril to U.S. national security from rising world energy consumption and the likelihood of resource wars.

AMY GOODMAN: Kevin Phillips, you talk about radical religion, about debt, and about oil, about this being an oil war. You also talk about peak oil. That's not talked about very much in the mainstream. Explain.

KEVIN PHILLIPS: The peak oil idea is that just as the United States oil production peaked in 1971, that we have a limited amount of oil globally, and that it's something that can't be re-created. It's running out. And the expectation of some is that the oil production of the non-OPEC countries will peak at some point during the 2010s, and that then the production of OPEC itself will peak in the 2020s or 2030s. Now, some people think that Saudi production has already peaked.

Now, if you believe this, and it's possible, then we face an enormous convergence, again under specific oil-related circumstances, of a global struggle for natural resources as the price of oil climbs, as we turn the armed services into a global oil protection service, which has been happening, and as we see the administration refuse to grapple with the need to really curb oil consumption in the United States, which is mostly through transportation and especially motor vehicles.

Most studies estimate that oil production will peak sometime between now and 2040, although many of these projections cover a wide range of time, including two studies for which the range extends into the next century. The timing of the peak depends on multiple, uncertain factors that will influence how quickly the remaining oil is used, including the amount of oil still in the ground, how much of the remaining oil can be ultimately produced, and future oil demand. The amount of oil remaining in the ground is highly uncertain, in part because the Organization of Petroleum Exporting Countries (OPEC) controls most of the estimated world oil reserves, but its estimates of reserves are not verified by independent auditors. In addition, many parts of the world have not yet been fully explored for oil. There is also great uncertainty about the amount of oil that will ultimately be produced, given the technological, cost, and environmental challenges. For example, some of the oil remaining in the ground can be accessed only by using complex and costly technologies that present greater environmental challenges than the technologies used for most of the oil produced to date. Other important sources of uncertainty about future oil production are potentially unfavorable political and investment conditions in countries where oil is located. For example, more than 60 percent of world oil reserves, on the basis of Oil and Gas Journal estimates, are in countries where relatively unstable political conditions could constrain oil exploration and production. Finally, future world demand for oil also is uncertain because it depends on economic growth and government policies throughout the world. For example, continued rapid economic growth in China and India could significantly increase world demand for oil, while environmental concerns, including oil's contribution to global warming, may spur conservation or adoption of alternative fuels that would reduce future demand for oil...

...While the consequences of a peak would be felt globally, the United States, as the largest consumer of oil and one of the nations most heavily dependent on oil for transportation, may be particularly vulnerable. Therefore, to better prepare the United States for a peak and decline in oil production, we are recommending that the Secretary of Energy take the lead, in coordination with other relevant federal agencies, to establish a peak oil strategy. Such a strategy should include efforts to reduce uncertainty about the timing of a peak in oil production and provide timely advice to Congress about cost-effective measures to mitigate the potential consequences of a peak. In commenting on a draft of the report, the Departments of Energy and the Interior generally agreed with the report and recommendations.

M. King Hubbert's predictions were for the lower 48. He didn't include the Gulf of Mexico. There is a little wiggle in the curve, hardly discernible by those discoveries in the Gulf of Mexico. But there was a little blip in the downhill slope, when we lowered the top of Hubbert's peak. So, right on schedule, we peaked in 1979. M. King Hubbert indicated, I think, it was in 1969, he predicted that the world would be peaking about now.

The question I always asked myself, if M. King Hubbert was right about the United States, and he gave us the basis of his analysis, which was very logical, if he was right about the United States, and since the United States is obviously a microcosm of the world, why shouldn't he be right about the world? If he was right about the world, shouldn't we have been doing something in anticipation of reaching a maximum oil production beyond which additional oil production would be impossible, prices would rise, oil, $65 a barrel today, and production would inexorably decline

. There is nothing that we have done in the United States to stop that. We have drilled more oil wells in the United States than all the rest of the world. Still we have not stopped that downward slope, just that blip from Prudhoe Bay; and now we are down to a bit over half of the oil that we produced in 1970, in spite of a vastly improved technique for enhanced oil recovery, for discovery of oil, 3-D seismic computer modeling and so forth.

David Strahan: ...You said today in your speech that conceptually the battle is over, the peakists have won. That's an astoundingly bold claim. I was astonished. What did you mean by that?

James Schlesinger: If you speak to people in the industry, they will concede that "whatever my company may say publicly, we understand that we are facing a decline in our own production and that world-wide we are not going to be be able to produce more fuel liquids or crude oil in the near future."

And if you look at pronouncements by governments, including the Energy Information Administration in the United States, the National Petroleum Council (NPC) what they show is that by the early 2020s we are going to have peaked out in terms of conventional oil productions. And that is an immense change from what we have seen before in the attitude of the industry.

In contrast to a widely discussed theory that world oil production will soon reach a peak and go into sharp decline, a new analysis of the subject by Cambridge Energy Research Associates (CERA) finds that the remaining global oil resource base is actually 3.74 trillion barrels -- three times as large as the 1.2 trillion barrels estimated by the theory's proponents -- and that the "peak oil" argument is based on faulty analysis which could, if accepted, distort critical policy and investment decisions and cloud the debate over the energy future.

A new study from Cambridge Energy Resources Associates, a prominent research firm, says not to worry. "Capacity growth will accommodate rising world oil demand so long as there are no major disruptions in the actual flow of oil," said CERA's Chairman Daniel Yergin. Global supply could increase 25% by 2015 to 110 million barrels a day, he says. This surge of new oil would meet forecast increases in demand, with a surplus to spare, putting downward pressure on prices, the study notes.

The report might be reassuring if CERA did not have a checkered forecasting record, and if its findings were not hedged six ways to Sunday. "Our focus is on physical capacity, not actual production which can fluctuate for political, economic, or technical reasons," Yergin explains. In CERA's feel-good scenario, "there are no problems below ground" and the myriad problems aboveground, although real, are likely to be short- lived, and thus can be ignored in their Reference Case. This is an absurd and dangerous nostrum, false on both counts...

...Despite a growing body of evidence to the contrary, CERA has concluded that world oil production will not peak until after 2020, that "peak oil remains firmly out of sight." Meanwhile a long list of informed observers, including T Boone Pickens, Henry Groppe, Charlie Maxwell, Jeremy Gilbert, Tom Petrie and Chris Skrebowski, have come to believe that a peak is likely between now and 2015. The Chinese agree, and there's nothing inscrutable about what they are doing, in their race to secure petroleum assets all around the world.

During the last quarter-century, world energy demand has increased about 60 percent, supported by a global infrastructure that has expanded to a massive scale. Now, most forecasts for the next quarter-century project a similar percentage increase in energy demand from a much larger base. Oil and natural gas have played a significant role in supporting economic activity in the past, and will likely continue to do so in combination with other energy types. Over the coming decades, the world will need better energy efficiency and all economic, environmentally responsible energy sources available to support and sustain future growth.

Fortunately, the world is not running out of energy resources. But many complex challenges could keep these diverse energy resources from becoming the sufficient, reliable, and economic energy supplies upon which people depend. These challenges are compounded by emerging uncertainties: geopolitical influences on energy development, trade, and security; and increasing constraints on carbon dioxide emissions that could impose changes in future energy use. While risks have always typified the energy business, they are now accumulating and converging in new ways.

So in summary, the NPC report is saying that production will increase by around 25% over the next twenty five years, but this increase is entirely reliant on finding large amounts of new oil, mainly in the Middle East. Unfortunately, it is rather unlikely that the existing claims of oil reserves in the Middle East are true, and even less likely that massive amounts more oil can be found there. Even if it could, the Middle East is the least politically stable region of the world, and relying ever more heavily on it for critical inputs to our economy is likely to be fairly painful at regular intervals.

"The NPC artfully camouflages the enormous near-term challenges in producing sufficient oil and gas to fuel the global economy," says Randy Udall, a board member of ASPO-USA. "Hard truths are hinted at, but are never clearly identified. Troubling trends are referenced, but their ramifications are dodged."

The NPC's optimistic scenario laid out in its Executive Summary is contradicted by a study published on July 9, 2007 by the International Energy Agency (IEA), the Organization for Economic Cooperation and Development's (OECD) energy watchdog. In its Medium-Term Oil Market Report, the IEA forecasts a "crunch" in 2012. Although the IEA does not dub this "peak oil," the phenomenon it describes fits the definition.

In October 2005, U.S. Energy Secretary Samuel Bodman charged the National Petroleum Council with determining "what the future holds for global oil and gas supply" and whether "incremental supplies can be brought on-line, on-time and at a reasonable price that does not jeopardize economic growth."

"We commend Secretary Bodman for requesting a thorough analysis of the nation's energy challenges," says Udall. "In hindsight, however, assigning this critical task to a group funded and dominated by oil industry representatives was a mistake. Charging the NPC with analyzing oil and gas is akin to asking the tobacco industry to forecast lung cancer. With an opportunity to help explain, among other things, why a gasoline fill-up now costs up to $75, the NPC failed to enlighten."

Previous NPC forecasting has been flawed, according to ASPO-USA. The NPC's 1999 report on North American natural gas predicted stable prices and soaring production; within a few years, the exact opposite occurred. The current report forecasts production increasing seamlessly from 86 million barrels/day today to more than 115 million barrels/day by 2030.

Chair: Lee R. Raymond - Retired Chairman and Chief Executive Officer, Exxon Mobil Corporation

Chair Coordinating Subcommittee: Alan J. Kelly. Former General Manager, Corporate Planning and Manager, Global Logistics Optimization, Exxon Mobil Corporation

Vice Chair Demand: Daniel H. Yergin - Chairman Cambridge Energy Research Associates

Chair Demand Task Group: James Burkhard Managing Director, Global Oil Group Cambridge Energy Research Associates

Vice Chair Supply: David J. O'Reilly - Chairman of the Board and Chief Executive Officer Chevron Corporation

Chair Supply Task Group: Donald L. Paul. Vice President and Chief Technology Officer Chevron Corporation

Vice Chair Technology: Andrew Gould - Chairman and Chief Executive Officer Schlumberger Limited

WASHINGTON, DC, Jan. 3-A new report from the Union of Concerned Scientists offers the most comprehensive documentation to date of how ExxonMobil has adopted the tobacco industry's disinformation tactics, as well as some of the same organizations and personnel, to cloud the scientific understanding of climate change and delay action on the issue. According to the report, ExxonMobil has funneled nearly $16 million between 1998 and 2005 to a network of 43 advocacy organizations that seek to confuse the public on global warming science.

"ExxonMobil has manufactured uncertainty about the human causes of global warming just as tobacco companies denied their product caused lung cancer," said Alden Meyer, the Union of Concerned Scientists' Director of Strategy & Policy. "A modest but effective investment has allowed the oil giant to fuel doubt about global warming to delay government action just as Big Tobacco did for over 40 years."

Since its peak in 1980, the price has fallen erratically. It has plunged by half in the past two years alone. In real terms, oil now costs roughly what it did before 1973. Crude is gushing from the ground at the rate of 66m barrels a day, half as copiously again as in OPEC's prime. The world is awash with the stuff, and it is likely to remain so.

What most of these doomsday scenarios have gotten wrong is the fundamental idea of economics: people respond to incentives. If the price of a good goes up, people demand less of it, the companies that make it figure out how to make more of it, and everyone tries to figure out how to produce substitutes for it. Add to that the march of technological innovation (like the green revolution, birth control, etc.). The end result: markets figure out how to deal with problems of supply and demand.

Which is exactly the situation with oil right now. I don't know much about world oil reserves. I'm not even necessarily arguing with their facts about how much the output from existing oil fields is going to decline, or that world demand for oil is increasing. But these changes in supply and demand are slow and gradual -- a few percent each year. Markets have a way with dealing with situations like this: prices rise a little bit. That is not a catastrophe, it is a message that some things that used to be worth doing at low oil prices are no longer worth doing. Some people will switch from SUVs to hybrids, for instance. Maybe we'll be willing to build some nuclear power plants, or it will become worth it to put solar panels on more houses.

Our results are congruent with the fundamentals of the problem:
- Waiting until world oil production peaks before taking crash program action leaves the world with a significant liquid fuel deficit for more than two decades.
- Initiating a mitigation crash program 10 years before world oil peaking helps considerably but still leaves a liquid fuels shortfall roughly a decade after the time that oil would have peaked.
- Initiating a mitigation crash program 20 years before peaking appears to offer the possibility of avoiding a world liquid fuels shortfall for the forecast period.

The obvious conclusion from this analysis is that with adequate, timely mitigation, the costs of peaking can be minimized. If mitigation were to be too little, too late, world supply/demand balance will be achieved through massive demand destruction (shortages), which would translate to significant economic hardship, as discussed earlier.

Nuclear power plants are so feared and controversial that none have been built in the United States for many years, and some countries (for example, Italy) have outlawed them completely. When the oil crisis comes, opposition to nuclear power is likely to weaken considerably. But it will take at best a decade or more for the first new power plants to come on line--and the use of nuclear fuel is pretty much limited to power plants. Nuclear energy will not easily substitute for oil... (p.19)

Even if there is enough nuclear fission fuel on Earth to last for a while, the scale of what is needed is staggering. The largest practical nuclear power plant would produce about one Gigawatt (one billion watts) of power. Just to replace the 10 Terawatts of fossil fuel the world burns today would require opening 10,000 new Gigawatt plants, one a day for 30 years. And by then, of course, we would need to replace far more than 10 Terawatts.(p.107)

But we're living in a world in which oil prices keep setting records, in which the idea that global oil production will soon peak is rapidly moving from fringe belief to mainstream assumption.