Steve Andrews has thirty years of experience in the energy sector in consulting with builders, municipalities, and utilities, as well as working with public television shows and freelance writing. In 2005, he cofounded the nonprofit Association for the Study of Peak Oil and Gas–USA.

Roughly 36 percent of the world’s commercial energy comes from oil. While shares for the other fossil fuels—coal (27 percent) and natural gas (23 percent)— are on the rise, the flow of oil proves tough to replace. And that flow, at plus or minus 84 million barrels a day, is enormous.

How big? If you ever cross the bridge over the Colorado River in the
western Colorado town of Glenwood Springs during late July, look down.
The river rushing below roughly equals the amount of oil the world is
consuming at that moment in time.

In the United States, close to 70 percent of the 19 million barrels we
consume daily runs our transportation system. Within that transportation
sector, the largest share goes to gasoline, then diesel and jet fuel. Oil consumption in power plants declined from 17 percent in the early 1970s to 2 percent today. This means that cutting down on our oil use revolves tightly around our transportation system, not the power-generation sector.

Oil Scarcity
We’re not running out of oil, either in the United States or around the world. But we’re running out of options to steadily increase the available supply. In fact, before the 2008 recession, it was getting tough just to maintain oil production at then-current levels. Declining annual production in older fields was catching up to the more-publicized gains in new fields coming on line. Then, after the last fast growth period (2003 to 2004), production flattened.

With increasing frequency, new countries join the unfortunate club
of oil-producing nations in which production has slipped into permanent
decline. Among the world’s twenty largest oil producers (the Big 20), which
produce most (84 percent) of the world’s oil, the first to decline was the
United States (1970), then Indonesia (1977), the United Kingdom (1999), Norway (2001), and Mexico (2004). Figure 1 shows that over half of the Big 20 are either experiencing flat or volatile production (including Russia, Iraq, and Nigeria) or have passed their peak production and are in decline. While the remainder still grow their supply, some nations (including China and Azerbaijan) are approaching their peak production era; declines will follow soon.

Eventually, the math dictates that declines will more than offset gains.
At that point, world oil production will have hit an all-time high, a peak.
In May 2009, a report by the respected investment analyst firm Raymond
James & Associates stated that “peak oil on a worldwide basis seems to have taken place in early 2008.” They concluded that “reaching peak oil still represents a transformative moment in the history of the oil market…it is only a matter of time before prices begin to reflect the reality that oil scarcity may become a fact of life in the not-too-distant future.”

Raymond James is only the latest to reach this conclusion. In Denver,
in the spring of 2009, widely respected oil-industry financial analyst Tom
Petrie said, “you can make a good argument” that world oil production won’t
ever exceed last summer’s peak. Capital funds manager T. Boone Pickens
agrees. Back in the fall of 2007, Sadad Al-Husseini, retired vice president for
Saudi Aramco, the world’s largest oil company, stated that world oil production
was within a year or two of hitting a final plateau. Christophe de Margerie,
chief executive officer of France’s oil giant Total, said in the winter of
2009 that world oil production would probably never exceed 90 million barrels per day—a level only marginally above last summer’s high (87 million barrels per day). Other companies and organizations identifying oil scarcity as a near-term concern include Toyota, Merrill Lynch, Deutsche Aerospace, Volvo Trucks, the US Army Corps of Engineers, the World Resources Institute, and the nation of Sweden, among others.