Peak Oil Theory is Now Peak Oil Fact - 3/16/08

Peak oil is when the maximum rate of petroleum production is reached, at which time the rate of production enters a terminal decline never to return to the level of production in the past. This will cause prices of oil and anything related to oil to rise for this time forward. 

In 1956, M. King Hubbert was the first geologist to recognize we have a limited supply of oil.  He accurately predicted that the United States oil production would peak between 1765 and 1970 which it did!  In 1970, U.S. oil production peaked at 9.5 million bpd and has been declining ever since.  Hubbert’s model shows the production rate of this limited resource in a symmetrical bell shaped curve based on the limits of exploitability and market pressures.

The U.S. produced less oil in 2006 than it did in 1950.  This makes us more reliant on foreign oil than ever.  Oil imports made up 40% of the U.S. trade deficit last year.  Venezuelan oil accounts for 10% of all U.S. oil imports.

The major oil fields of Texas and Alaska are old and it has become difficult to remove the remainder of oil.  We are also seeing this around the world; like in Saudi Arabia, it is becoming more difficult for them to remove oil.  Very few new reserves across the world have been found in recent years.

Oil supplies are so sensitive that it only takes Chavez opening his mouth to cause the markets to jump.  The slightest reduction in supply could cause a major spike in oil prices.

Since 1986, America has had only one year of increased oil production which afterward shows a continual decline.  Many alternative energy sources like ethanol and hydrogen are being developed, but it may be too little too late.  We have a tremendous amount of catching up to do, but we most likely will see a major energy crisis before these alternatives can be fully developed. Peak Oil Video

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