Peak oil is the name given for the peak in global oil production. Peak oil is reached when the maximum rate of oil extraction has been reached, after which the rate of oil extraction declines.
The peak in oil production is not the same as the complete depletion of oil, but it does mean oil will be more expensive, for many people unaffordable, because the oil market will switch to a sell market instead of a buy market.
Nations that depend on cheap oil prices are facing an economical disaster when the peak in oil production is reached. These nations will be forced to change their cultural, social and economic policy to survive. Cuba already experienced peak oil after the fall of the Soviet Union in 1990.
read how Cuba survived peak oil »
This graph shows the top consuming oil nations in the world
Peak oil is based on the extraction rates of oil wells. The rate an oil well extracts oil normally grows exponentially until the rate reaches his peak, it then declines until the oil is depleted. As said before, peak oil is not the same as the complete depletion of oil; peak oil is the point where the maximum rate of oil production has been reached, while depletion means there aren't any oil reserves and supplies left.
The concept of peak oil is based on the Hubbert curve, developed by M. King Hubbert. In 1956 he accurately predicted the U.S. oil production would peak between 1965 and 1970 by using the models behind the peak oil concept.
The Hubbert curve models, now better known as the Hubbert peak theory, and variants of it have shown accurate results of peaks and declines of oil extraction from oil fields, wells and countries. Results have shown the model can also be applied on other limited-resources then oil, such as coal and gas.
The graph below is a Hubbert curve model. The model shows the phases a limited-resource such as oil goes through. The production grows exponential until the maximum point of production has been reached. From there the production rate declines fast until the rate becomes more stable.
The Hubbert curve model shows the phases production of oil goes through over time
Before oil can be pumped, it needs to be found first. The peak of world oilfield findings occurred in 1967. The Association for the Study of Peak Oil and Gas (ASPO) report, the rate of oil discoveries has been dropping down steadily since.
On December 2005, Exxon-Mobil company spokesman William J. Cummings said:
"All the easy oil and gas in the world has pretty much been found. Now comes the harder work in finding and producing oil from more challenging environments and work areas."
The graph below shows the growing gap between oil discoveries and oil production. Production keeps increasing while oil discoveries declines. By the year 2050 there won't be any oil left to discover.
The gap between oil discoveries and oil production keeps growing
"It is pretty clear that there is not much chance of finding any significant quantity of new cheap oil. Any new or unconventional oil is going to be expensive."
- Former chairman of Shell Lord Ron, October 2008
Future Oil Discoveries
Most oil sources that are easy to reach have already been found by the oil companies. Oil from these oil sources are considered 'cheap-oil' because it's easy to extract and transport oil from these sources. Most oil sources on land and near the surface are discovered.
Any future oil discoveries will be made off-shore, far from markets. It will cost more money and time to produce and transport oil, because of this the oil production will decline. Further oil production becomes pointless when it takes the same amount of energy to produce a barrel of oil.