The global economy runs on cheap oil. There is virtually nothing you own today that doesn’t require oil either to produce or transport. And we’re using more and more of it all the time. Clearly if oil runs out, then we’re in trouble. Peak Oil is technically the halfway point – the beginning of the downwards slope towards total exhaustion of the earth’s oil reserves.
New discoveries peaked in 1965. The evidence from countries that have oil is that production peaks 30-40 years after discoveries. In 2008 oil prices hit $100 a barrel for the first time. That’s higher in real terms than the oil shocks of the 1970s. The price is likely to bounce around, but the trend is only going one way– up.
But long before we run out of oil we will run out of cheap oil. When supply starts to fall but demand continues to increase, then prices will rise even faster. And when markets start to factor those accelerating price rises in, chaos is likely to ensue. That’s what we really mean by Peak Oil. We may already have reached it or we may be a few years away. Most estimates are that Peak Oil will be reached between 2006 and 2020.