The basic idea of the peak oil hypothesis is that global oil production will follow a bell-shaped curve over time, and that we are somewhere near the top of the bell. Once it is passed, a steep decline in output is expected, probably alongside quickly rising prices. The bell-shaped progression is one that has been observed in individual countries that have seen their output peak, including the United States. The Oil Drum is probably the premier website discussing the peak oil possibility.
A world with swiftly falling hydrocarbon availability and rising prices would have numerous economic and geopolitical consequences, from rising food prices to a probable scramble for alternative fuels. That being said, not everyone finds the peak oil theory convincing. Some argue that improved technology will allow us to tap ever-more-unconventional sources of hydrocarbons. Some argue that, rather than falling off sharply, global production will go into a long plateau phase. Others argue that the emergence of alternative fuels – such as biofuels – will fill the gap associated with falling production easily.
What do readers here think? Are we likely to see a sharp contraction in global oil output in coming decades? If so, what would the consequences be? (We already talked about hedging against the possibility.) What effect will new technologies have on this, and what consequences does it have for climate change outcomes and policy-making?
(On one side note, some economists who I’ve spoken to expect carbon pricing to seriously decrease the demand for oil by 2030 – to the point where global prices collapse and unconventional reserves such as the Athabasca oil sands are not worth exploiting. What do people think of that possibility?)