This is part five of the series I am writing about petroleum, which will be the single most important issue for this century. If you want to start at the beginning follow the links below.

Peak oil is a simple concept, until people try to make it complicated. If your read Petroleum: 300 Million Years of Sunlight you will recall that an oil well is established when petroleum is formed below ground and then rises up until it encounters an impermeable barrier, like shale, and forms a liquid pool. Geologists at oil companies work hard to find these fields and they are rapidly exploited when found. Consider the rate of extraction of oil from the field. The first well starts producing, and then more and more wells are drilled. As more wells are drilled the rate of extraction rises until the oil in the field starts to be depleted and the rate of extraction falls. So if you made a graph of the rate of extraction of oil from a single field, it looks like a bell curve flattened out a bit on the top, starting slow, rising to a peak, plateauing for a bit, and then falling as the oil field runs dry. 
This same concept applies to the entire world. In this case, instead of a single oil field, you need to consider the oil window (the zone 1.5 to 2.5 miles underground where conditions of temperature and pressure are just right to convert decaying organic matter into petroleum) as the field with all of the wells around the world being drilled into it. Extraction rates from the oil window will follow exactly the same behavior as that observed in a single field, starting slow, rising quickly, peaking (in a bit of a plateau), and then declining. Unless you have a vested interest in not understanding this (think Exxon Mobil or the Saudi royal family) there is not much to be confused about. See the graph below for a visual.

The patron saint of Peak Oil is M. King Hubbert (just about the best name ever) a geoscientist who lived from 1903 to 1989 and worked part of his career for Shell Oil. In 1956, the USA was feeling prosperous and powerful after World War II and oil production was growing by leaps and bounds. Hubbert threw cold water on the party and published his theory on Peak Oil predicting and that oil extraction in the USA would peak between 1965 and 1970. He was widely and thoroughly mocked. The peak year for extraction of oil in the USA was 1970 and it has been declining steadily ever since. See the graph below.

In 1974 Hubbert predicted at world oil production would peak in 1995. He was taken a bit more seriously this time. By the time he died in 1989 he had to start revising his prediction date to farther in the future because improvements in transportation fuel efficiency exceeded his expectations. The key point, however, is not whether Hubbert got the exact year correct, but rather the overall and undeniable accuracy of his theory and its implications (which I will cover in upcoming blogs).
You can never really know you have hit the peak until you have a chance to look through the rear view mirror (Hubbert wasn’t sure he was correct about the US peak being in 1970 until several years later). At the moment it appears that the peak of world oil extraction may have occurred in 2008. Of the top 65 oil producing nations in the world, 54 have already passed their peak. In my next blog I will explore the interdependence of world oil demand approaching world oil supply as part of the global economic crisis of 2008. While there is a chance that worldwide extraction of oil 2011 or 2012 may yet top 2008, Peak Oil has either already past or is at our doorstep and this will change everything.
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