Why does gasoline cost so much more than it did five years ago? Why did it cost more five years ago than it did ten years ago?
 
The graph below shows why oil prices stubbornly refuse to back down to $30 or $40 per barrel as some experts assured us it would after Hurricane Katrina. Whenever demand rises above supply (or production in this case), prices must rise.
 

 
There are two factors to note here. First is that demand is rising at a very good clip. This is largely due to increasing demand from China and India--but also due to growing economies in places like Canada. The second thing to note is that global production peaked in 2005. In May 2005, we hit 82.08 million barrels per day and we've been going slightly down ever since. Nobody's 100% certain that it will ever go above that rate again.
 
The graph below shows three different scenarios. The optimistic scenario in dark green assumes that OPEC will ride in on a white horse and save the day. The light green scenario assumes that when prices hit a certain level, we will be forced to conserve energy--and thus reduce demand and allow supplies to recover...but only for a few years. The purple scenario assumes that production will decline by about 2% to 3% a year...and in fact, some major oil producing countries such as Saudi Arabia and Mexico are experiencing declines much steeper than that right now.
 

 
It helps to look at the historical discovery of oil reserves. As the graph below shows, we discovered most of the planetary oil reserves back in the 1950's, 60's and 70's. The green bars show the discoveries and the red line shows our consumption levels of that same oil.
 

 
Now lets subtract our consumption from the discoveries we make each year. The graph below shows that the last time we discovered more oil than we consumed was back in 1983.
 

 
In all of this discussion, it is vitally important to remember that the production of the second half of any oil field is a lot more difficult (and expensive) (and produces lower quality oil) than the production of the first half. In fact, there is the inevitable point during the second half of production where we start to use up more energy getting the stuff out of the ground than it actually gives us. During the first half of production, we are skimming the cream, so to speak. During the second half, we are scraping the bottom of the barrel.
 
Another way to put everything in perspective is to look at the world's top conventional oil producers and note how their production is falling. Only Russia and China have increasing production (in green). All the rest are spiralling downward (in red).
 

 
If you're still sceptical, check out the site below. It's the most thorough investigation of all the factors associated with peak oil that I've seen.
 

 
Or click here to see the Wikipedia entry on Peak Oil.
 
These next three items feature interviews
on the topic with Matthew Simmons, who is
the head of Simmons & Co., the world's
largest energy investment bank.
 

 

 


 

 


 

 
Just as with the natural gas supply problem, there are easy answers and not-so-easy answers. An example of the former would be for the city to initiate a website dedicated to matching up potential carpoolers with each other. The city has stated that most of our residential population is in the south-east, and most of them commute to the north-west. Carpooling would have the potential to ease a lot of this traffic burden. The city would save tens or hundreds of millions of dollars by not having to build new roads. The citizens would save gas money (especially when we get into the era of exceptionally high gas prices). And we would also be building up substantial social capital in that intra-neighbourhood ties would be strengthened.