As crude oil hits ever higher, Peak Oil concerns are not new, having first been raised by M. King Hubbert, a Shell Oil geophysicist, over 50 years ago. In a now-famous paper written in 1956, Hubbert suggested that production rates for oil (and other fossil fuels) follow a bell curve: In new fields, clean, highly pressurized oil flows abundantly to the surface, and as new wells are drilled, production rates rise steadily. After about half the oil has been extracted, however, production rates start to go down. There's still oil left, but declining pressure, exhaustion of the best oil pockets, and increasing contamination bring it to the surface ever more slowly. Applying this production model to the entire United States, taking into account the rate at which new fields were being discovered, Hubbert predicted that oil production in the lower 48 states would peak around 1970 and then start declining. And the facts is that oil production in the USA DID peak in 1970, and has since gradually declined from some 9.5 million barrels a day, to days level of 4.6 million barrels a day.

Fewer and fewer new reserves are being find to replace consumption and the quality of reserves found tends to be poorer and more costly to extract oil from. Alternatives such as the tar sands in Canada will likely take decades to develop and even then unlikely to make up the difference between projected demand of 100million bpd in 15 years time, and today's demand of some 84 million bpd.

And thus we come to reliance on Saudi Arabia's oil reserve projections which rely on Saudi Arabia doubling oil production from 10 million bpd to 20 million bpd during the next 15 years to meet the increasing demand.

The problem here lies the lack of transparency within the Saudi Oil industry, where until quite recently very little data was forthcoming other than year on year claims of increasing oil reserves for OPEC quota reasons rather than actual verifiable discoveries. The established reserves of some 280 billion barrels, maybe over inflated by some 100 billion barrels and be barely 180 billion barrels, off course new discoveries could be made and likely will be, but the question is whether Saudi Arabia will be able to double oil production let alone maintain the current out put of some 10 million bpd.

The reason why the projections and actual ability to supply greater oil may be way out is due the the fact that the amount of water contamination in the oil determines how much life is left in the oil fields, recently it was found that some of Saudi's biggest oil fields, were producing a mix as high as 30% of water with oil, implying that less oil is available for the same amount of production due to increasing water contamination i.e. less oil produced and not more as most of Saudi Arabia's oil comes from these handful of old giant oil fields, which suggest ever more water mixed with the oil, so more wells would need to be sunk just to maintain the same level of oil production.

So instead of a doubling in Saudi oil production to save the day, it could well be that in fact we are seeing the peak in Saudi Oil production ! Even if large new oil fields come on stream during the coming years, they will be offset by the loss of production of crude oil on the existing fields.

As the worlds spare capacity of oil production gets eroded by demand we will increasingly see a sharp rises in oil prices towards and above $100 per barrel !!!

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