It has taken between 50-300 million to form, and yet we have managed to burn roughly half of all global oil reserves in merely 125 years or so. 

The world now consumes 85 million barrels of oil per day, or 40,000 gallons per second, and demand is growing exponentially.

Oil production in 33 out of 48 out countries has now peaked, including Kuwait, Russia and Mexico. Global oil production is now also approaching an all time peak and can potentially end our Industrial Civilization. The most distinguished and prominent geologists, oil industry experts, energy analysts and organizations all agree that big trouble is brewing. 

The world is not running out of oil itself, but rather its ability to produce high-quality cheap and economically extractable oil on demand. After more than fifty years of research and analysis on the subject by the most widely respected & rational scientists, it is now clear that the rate at which world oil producers can extract oil is reaching the maximum level possible. This is what is meant by Peak Oil. With great effort and expenditure, the current level of oil production can possibly be maintained for a few more years, but beyond that oil production must begin a permanent & irreversible decline. The Stone Age did not end because of the lack of stones, and the Oil Age won't end because of lack of oil. The issue is lack of further growth, followed by gradual, then steep decline. Dr King Hubbert correctly predicted peaking of USA oil production in the 1970's on this basis.

It is now widely acknowledged by the world's leading petroleum geologists that more than 95 percent of all recoverable oil has now been found. We therefore know, within a reasonable degree of certainty, the total amount of oil available to us.  Any oil well has roughly the same life cycle where the production rate peaks before it goes into terminal decline. This happens when about half of the oil has been recovered from the well. We have consumed approximately half of the world’s total reserve of about 2.5 trillion barrels of conventional oil in the ground when we started drilling the first well at a current rate of over 30 billion a year, meaning the world is nearing its production plateau.

Worldwide discovery of oil peaked in 1964 and has followed a steady decline since. According to industry consultants IHS Energy, 90% of all known reserves are now in production, suggesting that few major discoveries remain to be made. There have been no significant discoveries of new oil since 2002. In 2001 there were 8 large scale discoveries, and in 2002 there were 3 such discoveries. In 2003 there were no large scale discoveries of oil. Given geologists' sophisticated understanding of the characteristics that would indicate a major oil find, is is highly unlikely that any area large enough to be significant has eluded attention and no amount or kind of technology will alter that. Since 1981 we have consumed oil faster than we have found it, and the gap continues to widen. Developing an area such as the Artic National Wildlife Refuge in Alaska has a ten year lead time and would ultimately produce well under 1% of what the world currently consumes (IEA). 

Oil is now being consumed four times faster than it is being discovered, and the situation is becoming critical.

The consumption of a finite resource is simply a finite venture and the faster we use the quicker it peaks. 

The Saudi Arabia Case

With more than fifty oil-producing countries now in decline, focus on the oil-rich Middle East has sharpened dramatically. Countries of the Middle East have traditionally been able to relieve tight oil markets by increasing production, but, as the this region nears its own oil peak, any relief it can provide is limited and temporary.

Saudi Arabia is a major oil producer with 73% of all incremental world demand being met by this country. The worrying fact is that 90% of their production comes from only 5 mega fields (one is the Ghawar field which is the biggest ever discovered), and are all at risk of unplanned production collapse. In 2004 there were warning signs of production falling into depletion. For years, Aramco, the Saudi national company, use secondary recovery techniques by injecting enormous amounts of seawater (7 million  barrels daily) into their biggest field to boost production. These methods have only temporary effects, and lead to accelerated rates of depletion in the future. 

Matt Simmons, long time energy analyst who studied energy for 34 years, in his book “Twilight in the Desert” effectively confronts the complacent belief that there are ample oil reserves in Saudi Arabia and has created a compelling case that Saudi Arabia production will soon reach a peak, after which its production will decline and the world will be confronted with a catastrophic oil shortage. The factual basis of the book is over 200 technical papers published over the last 20 years which individually detail problems with particular wells or particular fields, but which collectively demonstrate that the entire Saudi oil system is “old and fraying” with reserves deliberately vastly overestimated.  

Geologist Dr Colin Campbell in a 1998 article in Scientific American also details numerous discrepancies about estimates in Middle East reserves. The extent of reserves reported remained amazingly constant from year to year and then jumped dramatically. A similar unexplainable jump occurred in other countries in the Middle East, sometimes even in the total absence of exploration, strongly suggesting that OPEC's reserves are overstated.

Peak Oil Imminent

While there is no agreement yet on the exact date that world oil production will peak, the degree of consensus among them is quite remarkable. Out of 21 studies, the statistical mean date is 2013 (excluding some of the biased oil company estimates), suggesting that the world may be facing shortfalls much sooner than expected.

Recently, CNN and Britain’s Independent also point out the reality of Peak Oil, acknowledging that world oil and gas reserves are as much as 80% less than predicted.

"One of nature's biggest forces is exponential growth" 

(Albert Einstein)

At a current average global consumption growth rate of 2% annually (1995-2005), by 2025 the world will need 50% more oil (120 mbd), and the International Energy Agency (IEA) admits that Saudi will have to double oil production to achieve this. And that's not even taking into account that 80% of the world is only just starting to use oil & gas

Based on Simmon’s analysis, sudden and sharp oil production declines could happen at any time. Even under the most optimistic scenario, Saudi Arabia may be able to maintain current rates of production for several years, but will not be able to increase production enough to meet the expected increase in world demand. There is no likely scenario that some new frontier can replace Middle East oil declines.

Senior Saudi energy officials have privately warned US and European counterparts that Opec would have an “extremely difficult time” meeting demand. Saudi Arabia calculates there is a 4.5m b/d gap between what the world needs and what the kingdom can provide. Repeated promises for increases in production have consistently failed to materialize. 

Exxon Mobil Corporation, one of the world's largest publicly owned petroleum companies, is the most forthright of the major oil companies having had the courage and honesty to quietly publish the declining discovery trend, based on sound industry data with reserve revisions properly backdated. Furthermore, the company is running page-size advertisements in European papers stressing the immense challenges to be faced in meeting future energy demand, hinting that the challenges might not be met despite its considerable expertise. Chevron recently joined their campaign publishing an advertisement in national newspapers stating that the 'Era of Easy Oil is Over' (see here to view full ad). 

The arrival of Peak Oil may be slightly delayed if worldwide demand for oil would fall. A global recession can hit demand for oil based products, independent of oil prices and is likely to be triggered by the global real estate bubble. If that bubble would burst, the loss of paper wealth would have a devastating effect on consumer spending and GDP. This would result in spare capacity building up again. Furthermore, the high price of crude itself can dampen demand. This problem is particularly noticeable in governments offering energy subsidies. This decreased consumption is not so obvious in cash-rich nations such as the USA or the EU, but it is there in a smaller measure. Nevertheless, this dampening adjustment would only be short lived and simply postpone the inevitable, only ensuring a steeper and more uncontrollable decline, but I acknowledge the possibility.

Initially it will be denied. There will be much lying and obfuscation. Then prices will rise and demand will fall. The rich will outbid the poor for available supplies. 

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