"Simply defined, peak oil is that moment in time when global oil and natural gas production begins an irreversible and permanent decline which will not yield or give way regardless of how much money and effort is spent trying to change it. With demand still accelerating rapidly in both the US and the industrialized and developing world, the arrival of peak oil literally describes a point of overshoot in which economic and ecological stasis - let alone growth - becomes unsustainable." -Michael Ruppert

Oil production in lower 48 states Oil production Vs. price Texas oil production peaked in 1972 North America oil production peaked in 1985 U.K. oil production peaked in 1999

Oil and natural gas are indispensable to our way of life. The world consumes 10 calories of hydrocarbon energy for every calorie of food that is eaten. All commercial fertilizers are made from natural gas; all pesticides from petroleum; and all irrigation, plowing, harvesting and transport is accomplished by either oil powered machinery or oil or natural gas generated electricity. There are between 600 and 700 million internal combustion powered vehicles on the planet while the demand for more is rising exponentially - especially in China where GM's sales rose 300% in 1 year alone. According to National Geographic there are 7 gallons of oil in every tire.

If the world chooses to suddenly build 600 million new vehicles that run on an alternative energy source (perhaps hydrogen?) how much oil will be required to mine and melt the ore, to transport it to factories that don't yet exist, to create the paints and solvents and plastics needed? All plastic is made from oil. Hydrogen is a cruel joke which creates false hope; a study in EV Magazine reported that the average life expectancy of an expensive fuel cell engine was only 200 hours. Commercial hydrogen is now made from natural gas, which we're nearly out of too. China's economic growth has seen it replace Japan as the world's 2nd largest importer of oil, coming into direct economic and political competition with the US for what oil remains.

Discoveries of large oil deposits have been in steep decline since 1962. Demand, on the other hand, has been soaring. A study published in Petroleum Review suggests that production might not be able to keep up with demand by the year 2007. This study is a survey of mega projects (oil fields with reserves of over 500 million barrels and the potential to produce over 100,000 barrels per day). Mega projects are important not only because they provide the bulk of the world's oil production, but also because they have a better net energy profile than smaller projects, meaning they provide a more substantial profit than smaller projects.

The 6 billion+ people on the planet consume 1 billion barrels of oil (or 2 mega fields) every 11½ days, yet the discovery rate for mega projects has dwindled to almost nothing. This fact can be observed in the data for the last few years:

• 2000: 16 new mega field discoveries
• 2001: 8 new discoveries
• 2002: 3 new discoveries

From first discovery to first production generally takes about 6 years, depending on whether the project can make use of any existing infrastructure - then the startup time might be cut to 4 years.

• 2003: 7 new mega projects begin production
• 2004: 11 new projects begin
• 2005: this is the peak year with 18 new projects
• 2006: 11 new projects
• 2007: only 3 new projects are scheduled to begin production
• 2008: 3 more

There are no new projects on track for 2009 or 2010. The study points out that currently about one third of the world's oil production comes from declining fields, with a likely overall decline rate of about 4%. As a result, global production capacity is contracting by over 1 million barrels per day every year; new production is the only thing offsetting this decline.

In spite of repeated assurances from the Saudi government that they can and are increasing production, the evidence is growing that they cannot; in fact, Saudi Arabia may have already peaked. New studies are reporting that Saudi oil wells in the mother of all mega fields, Ghawar, are showing 55% water cut. What this means is 55% of what is pumped out of Ghawar every day is the same seawater that was pumped in to push the oil up. Experience has shown that when the water cut gets between 70-80% the field collapses. The rush to produce more oil is hastening the destruction of fields that could last much longer otherwise.

Events then seem to confirm these worries about Saudi Arabia, whose reassurances are now being chuckled at by major financial commentators, and Saudi pledges to increase production are having less and less effect on the markets. When Ghawar was discovered more than 60 years ago it had estimated reserves of almost 100 billion barrels of oil. In order to keep pace with accelerating demands the world will have to discover at least 3 new Ghawars in the next 10-15 years just to meet demand. There was only 1 Ghawar - there hasn't been another one since.

So when we look at the paltry and rapidly diminishing rate of discovery for the so-called mega fields, the prospects become just a bit more chilling. In the year 2003, for the 1st time since the 1920s, according to a leading petroleum consulting firm, not a single so-called mega field was discovered. By 2007, production capacity will have declined by 3-4 million barrels per day (BPD), yet this decline will be offset by 8 million BPD of new capacity drawn from the projects expected to come on stream over the next couple of years. This leaves a surplus of 4 million BPD in spare capacity. Yet global demand is growing by over 1 million BPD each year, so 3 years of demand growth is enough to reduce out spare capacity to 1 million BPD by the beginning of 2007, which will likely disappear before 2008.

But there is another factor to this oil formula: so many complaints are being voiced that a major part of the problem with current oil prices has to do with a lack of refineries. People point out that there are 18 different grades of gasoline in this country matching various state laws. Why, they demand, are no more refineries being built? The answer is the return on investment is uncertain; it takes 5-7 years and roughly $150 million to bring a complex refinery online. The cost of the refinery is paid for by the sale of the oil. The refineries are not being built and massive exploration projects are not being undertaken because the oil companies understand there is very little oil left to find.

By 2015, Global oil demand is expected to increase by over two thirds, that is 60 million BPD beyond current global consumption of between 75-80 million BPD. To meet future demand we will have to find the equivalent of 10 new North Sea oil fields with a decade. In the meantime Britain's North Sea is running dry, just like Alaska's North Slope did a decade ago. Rigs have been shut down and employees have been laid off, yet we are hard pressed to discover even one more mega field.

"We are facing the sharpest and perhaps the most violent dislocation (of society) in recent history." -Michael Meacher, Former British Environmental Minister

Nonetheless, there are many out there who just refuse to believe oil and natural gas are running out. Some insist oil is created automatically and infinitely by the Earth's core, disputing all known science showing otherwise. There are those who insist that alternative energies can be snapped into place immediately to allow for infinite economic and population expansion. Let's take a look at some recent developments around the world and see what they tell us...

This Week in Petroleum, an industry journal, has reported that non-OECD countries have begun to hoard petroleum and are buying all they can, even at what some analysts consider "inflated" prices.

Britain's oil depletion analysis center has confirmed data revealed in Petroleum Review that daily oil depletion is now exceeding 1 million BPD. In other words, every day the world produces 1.14 million BPD less than it did the day before.