|The dismal "science"|
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“”The peaking of world oil production presents the U.S. and the world with an unprecedented risk management problem. As peaking is approached, liquid fuel prices and price volatility will increase dramatically, and, without timely mitigation, the economic, social, and political costs will be unprecedented.
|—The U.S. Department of Energy|
The phrase "peak oil" refers to the prediction that world oil production (i.e., extraction from the Earth) levels are in the rough shape of a bell curve and will drop off at around the point where 50% of the world oil supply has been used, even as demand for petroleum and its derivatives continues to increase. At the point where production drops while demand continues to increase, then significant economic disruption may occur while the world goes into headless chicken mode whilst panicking for an alternative energy source. In the most extreme interpretations, all manner of societal disruptions are proposed to occur, including, but not limited to: famine, economic collapse, and ecological collapse. One is advised to hoard canned tuna and ammo just in case.
Peak oil is based on the earlier "Hubbert's Peak theory", developed in 1956 by M. King Hubbert of Shell Oil, who used this same concept in an attempt to predict a point at which United States oil production would drop. Hubbert predicted 1965 as the most likely time and 1970 as an optimistic scenario. In fact, U.S. oil production actually peaked in the early 1970s, either contradicting his prediction in some people's views, or making it just slightly pessimistic.
In most cases, the phrase "peak oil" refers to more than the fact that petroleum is a finite resource; this is no longer disputed by anyone (except a few cranks like those who adhere to the Soviet concept of abiotic oil). Peak oil is rather the belief that societal and economic disruptions (will? it may or may not have happened yet) begin when depletion of world oil supplies passes the 50% mark while demand keeps going up. It should be noted that there is no real argument about the fact that oil production must peak at some point in time. However, there is debate about when it will happen, why it will happen, and what the consequences will be.
 The problem
It is frequently supposed that our problems with oil will occur when we actually "run out" of oil, like a car that ran out of petrol (gasoline to 'Murkins), but this is clearly not the case. Up until now, global oil production and oil demand have increased more or less in step with each other. However, as oil is a non-renewable resource, at some point we will have inevitably used most of the readily available oil on the planet and global production will start to drop. This is again not disputed; former US Energy Secretary Dr James Schlesinger claimed on 18 Sep 2007 that the intellectual arguments over peak oil had been won, and that in effect "we are all peakists now".
Although it will only really be possible to identify when peak oil arrived with the benefit of hindsight, some question whether oil at 100 dollars per barrel will (or did) signify the start of the crisis.
On a country-by-country (or oilfield-by-oilfield) basis, some areas have already "peaked". In the United States, for example, oil "production" hit its all-time high decades ago. However, there is considerable debate about when we will have used 50% of the oil on the planet. Evaluations range from "it has already happened" to "in fifty years". A 2009 estimate from a collaborative study between the Kuwait University and the Kuwait Oil Company places the date in 2014.  This also depends on how the "oil supply" is defined. It is unlikely that more than half of all of the petroleum will be used up; rather, proponents of the concept claim that half of the "available" oil will be used up, with "available" being a term open to interpretation and debate.
As mentioned above, there is much debate about the consequences. The sources mentioned in the introduction (New Scientist and the US DOE report) suggest that the consequences could potentially be quite significant; others suggest there is nothing to worry about as human ingenuity and free-market liberalism always fixes everything.
The most obvious consequence will be an increase in the cost of fuel for transport, resulting in pricing of all transported goods rising, leading to inflation. As plastics, fertilisers, explosives, and many other things are made from oil (why do you think they're called "petrochemicals"?), all these will go up in price. One could argue that peak oil would spur development of "cleaner" energy sources, and thus counteract some of the effects caused by a lack of oil. This still leaves the problem of how to make petrochemicals we need.
Some people believe that it is unlikely that renewable energies will have been developed by the time oil becomes less practical as a high energy density source of fuel, Likely coal will take over some of oil's role in the world's economy, and it is likely that more coal will be used. Coal is generally a dirtier source of energy than oil. Proponents of nuclear energy and bio-fuels get excited at this point (although eventually, nuclear too will have the same problem).
It is argued that the projected increase in the price of oil will stimulate exploration and exploitation of presently uneconomic or prohibited oil production areas, such as in the Arctic or Antarctica (these places would also be opened up due to global warming, as we begin to see even now). This is certainly true. However, this will not greatly change the picture of rapidly rising oil prices as the exploitation of these alternative areas will be very expensive; this cost will be passed on to consumers.
It is also interesting that all peak oil debates have, as their base assumption, the idea that we will actually use all the accessible crude oil on the planet, and take no account of any possible reduction in use that would occur if we try to reduce global warming, nor the development of new technologies, non-fossil energy sources, and coal-to-liquid processes.
Some maintain that those who believe demand for oil will keep going up as available supplies drop fail to understand how supply and demand, price elasticity, substitute goods, and other basic market mechanisms work. According to this argument, if and when oil becomes too expensive for economic functions which depend on it, the market will seek substitute goods, which will progressively reduce the demand for oil as this process continues to the point that oil actually running out will not be a concern. Those who believe substitute goods are too expensive, or do not exist, fail to understand other basic market mechanisms such as economies of scale, human ingenuity, and, perhaps, hubris.
 See also
- ↑ US DOE on peak oil February 2005
- ↑ New Scientist: Brace yourself for the end of cheap oil August 2, 2003
- ↑  Energy & Fuels: Volume 24, Issue 3
- ↑ However, only about 15 per cent of petroleum is used to make petrochemicals (the "other products" on the graph); the rest all goes to fuel, petrol getting the most.
- ↑ See, for example, The Long Emergency by James Howard Kunstler, in which he asserts that every form of renewable energy is either "vaporware" or not able to meet current energy consumption needs, not even in combination. He believes only oil, coal, and nuclear are viable, and that as oil depletes, civilisation will collapse with mass starvation, riots, fire raining down from the sky, 8 by 10 glossy photographs with circles and arrows on the back of each one, &c, &c, &c. And no cars. Probably no Internet, either.