Friday, November 07, 2008

What is Peak Oil?

Peak Oil is the term given for the point of maximum global production of oil, after which oil production will decline over a period of years until all recoverable oil is depleted. Peak Oil is a geological reality that is recognized by U.S. National Academy of Sciences, U.S. National Academy of Engineering, U.S. General Accountability Office, U.S. Congressional Budget Office, U.S. Army Corps of Engineers, National Petroleum Council, and the major oil companies. Although there is uncertainty about when Peak Oil production will occur, most independent studies conclude that oil production peaked in 2006, or that it will peak within a few years. Because the global demand for oil is increasing rapidly, a decline in oil production will generate sharp increases in the price of oil as buyers compete for decreasing oil supplies. Because oil under girds the economy, oil price increases will cause price inflation in most products and services. Due to higher prices, consumers will reduce their purchases of products and services. Unemployment and economic depression will follow. As oil production declines, the global economy will stagnate and collapse. Because the U.S. is highly dependent on imported oil, the U.S. faces severe Peak Oil impacts. This explanation is continued at Peak Oil Report.