Editor’s note:

The concept of peak oil is well known to readers of FinancialSense.com, and listeners of the Financial Sense Newshour. But, for people outside of investment and political circles, it is barely a blip on the radar screen of daily living.

In this article, Dr. Duarte explores a subtle but important shift in reporting the Peak Oil phenomenon.

This article was originally published on January 18, 2006, at www.joe-duarte.com.

Today's Analysis: Peak Oil: On The Verge Of Hitting Prime Time

Some time within the next twenty years, perhaps as early as 2008, world oil production will peak, and life as we know it will change. This seems to be the emerging consensus being rapidly embraced by the academic and trading community in some circles.

One scientist, the University of Reading's Dr Roger Bentley, the secretary of the Association for the Study of Peak Oil & Gas, told the audience that "the evidence is irrefutable. He points out that 64 of the world's 100 or so oil-producing countries are already past the point of peak production and on the downward slope. Although there may be a "mini-glut" as output is stepped up from Russia, the Caspian and Iraq and new sources come on stream such as deepwater oil and oilsands, the trend, he says is unmistakable."

According to the U.K.'s Independent, at a London conference organized by the Dutch investment bank Insinger de Beaufort, a rather bleak set of data was emerging.

Dr. Bentley allows for some slippage in the numbers, but told the audience at the conference: "Dr Bentley believes that non-Opec production will reach a peak within the next 30 months while global output will start to decline between 2010 and 2015 or 2020 at the latest depending on the contribution from non-conventional sources such as oilsands."

Dr. Bentley sounds pessimistic. But there were others who sounded darker tones: "Dr. Jeremy Leggett, an oil industry geologist turned environmental campaigner turned chief executive of a solar energy company, paints an even more apocalyptic scene. He believes that peak oil will occur some time this decade. That will not only produce "horrible economic pain" as oil prices rise to choke off demand but it will also precipitate environmental disaster as oil-consuming countries switch to coal and hasten global warming. "

Indeed, the paper stated: "As the oil price nudged above $64 a barrel yesterday on heightened concerns about disruption to supplies from Iran and Nigeria, a small group of geologists, economists and commodity traders was meeting in London to consider a more fundamental question: when will the world begin to run out of oil?"

To be sure, the usual disagreements still abound. "Some commentators believe that moment may be as little as two years away, some reckon we do not need to worry for another 20 years and some think the peak of production is so far in the distance that it is pointless to even try to put a timescale on it."

Familiar readers, and those who listen to our weekly radio spot on the Financial Sense News Hour with Jim Puplava, know that several significant books on Peak Oil, and is consequences, have been written. Ken Deffeyes' "Hubbert's Peak," really started the whole movement, while Matthew Simmons' "Twilight In The Dessert," with its comprehensive data analysis and conclusion that Saudi oil fields are running dry, are at the forefront of the peak oil philosophy.

But, as the Independent points out, what's really important is what happens, if and when peak oil does indeed arrive since "its impact on the world economy - and the consumer lifestyles so many of us take for granted - will be profound."

Think about these two points culled from the Independent's article for a minute:

1. "Oil is essential to almost everything we do - 90 per cent of world transport is oil-dependent; all petrochemicals are produced from oil; 99 per cent of our food relies on oil in some way, either to grow it or get the produce to market; and 95 per cent of lubricants are oil-based."

2. "And, in many cases, oil is not easily replaceable. There are no realistic alternatives to oil for fuelling aircraft and ships, producing petrochemicals or powering cars, without massive investments in technology such as hydrogen."

Raging Arguments Hide Facts

The Independent summarizes the two sides of the debate quite succinctly.

On one side: "there are geologists who argue it is almost upon us or shortly will be, based on analyzing past production and discovery rates and field exhaustion and extrapolating into the future."

And on the other: "there are economists, political scientists and the oil majors who believe that oil producers - be they governments or companies - will always find a way to meet demand, whether through cleverer ways of finding and extracting oil or greater fiscal incentives to discover and produce more."

Our own view, which is slowly shifting more toward the geologist's side of the equation is that the easy oil has been found, and that any new oil, of which there may still be plenty of, will be so expensive to find and to extract, that there would be little profit for producers, middlemen, or retailers, making the whole thing moot.

As we've stated many times - why would anyone spend $100 dollars to get a barrel of oil out of the ground in Nigeria, Indonesia, Venezuela, or Iran, under a steady rain of bullets, if they could only sell it for $70?

Conclusion

Oil production is slowing. Prices have been rising. And the Peak Oil movement is gathering steam.

So far, this is "inside baseball," within investing and scientific circles, with some mention in the mainstream media.

But, at least in the U.S., there have been no headlines in the National Enquirer about the end of oil, nor has there been a highly promoted piece on 60 Minutes, Nightline, or 20/20 on this subject.

That is the next logical step, though, as the story gathers steam.

One thing is certain. Peak oil is working on becoming a reality. Whether it comes because there is no oil left to produce, or whether it comes because oil companies aren't willing to take the huge risks now needed to get at the stuff, doesn't really matter.

In other words, if you can't get it, or you won't get it, you still don't get it. And splitting hairs over this won't matter much, if it gets to the point where we sit in cold, dark houses, as we watch our cars rust.