Sept. 1st, 2014
The peak happened at the turn of the century between 1998 and 2003. It may have happened slightly earlier or later. The exact year may never be known, but it we will only see it more clearly the farther away from it we get. And it is irrelevant. It happened.
For the first decade of this century there was (and continues) a debate about the legitimacy of “The Peak Oil Theory.” The “theory” (its alarms, claim some, having been sounded no less then five times in the last hundred plus years since oil was discovered in Pennsylvania) is actually simply the curve on a graph. It is based on mathematics related to observable traits of the oil reservoirs as crude oil is produced from them.
The “peak” was the midway point on a bell curve which contained all the world’s “reserves.” The debate largely focused on the date of the peak, past which oil production was declining – this of course lead to debate about how many “reserves” there were.
The debate produced dozens of good books and information about the most important [fill in the word, I’m at a loss for one] of human existence: oil. But the peak had already happened. Everybody missed it because they were looking at the wrong numbers.
Around the turn of the century, the price began to rise. It at least quadrupled in about a decade from $20 to $80. And I’m not talking about the price of oil that the consumer is willing to buy oil at, at the pump, filling out the demand/supply equation. What rose and is really key to an understanding of oil economics is the price at which global producers are willing to pay to extract 90 million barrels per day(mbpd).
The blue line is a six-month average of the monthly Nymex price, inflation adjusted.
The red and green lines are the maximum and minimum price from the PRECEDING 3 years to the blue line.