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Page 1 of 2 First, a definition. If you're Paris Hilton, go here for your explanation, otherwise ... The peak oil theory does not necessarily say that the world is running out of oil. That's actually an unstated fact. After all, nobody is actually making more. What peak oil actually suggests is much simpler: At some point, global oil production will reach a peak, and then begin to decline. At that point, oil will become more expensive, because it will become increasingly expensive to discover and extract what oil there is left. As oil becomes more expensive, demand will go down. We'll never actually use the last drop of oil because it will be too expensive to buy. According to peak oil theorists, the U.S. experienced its own peak in oil production in the 1970s. Globally, the estimates of when we reach peak oil production range from yesterday to 20 years to 50 years or more - take your pick. New Resources Harder To Find, Harder To Tap New crude oil discoveries are not coming fast and furious, though Brazil has had some luck in this area lately. Just last week, Brazil announced a major find 155 miles off the coast of Sao Paulo, near the Tupi oil field that was discovered in 2006. Petroleo Brasileiro SA (Petrobras) isn't discussing exactly how big they think the discovery is, but the Wall Street Journal reports that Petrobras is planning to lease another 40 deep-sea oil rigs in 2017 - this after it already has 80% of the world's deep-sea drilling vessels under lease. New supply coming on line in Brazil is exciting news for the U.S. because more oil close to home would decrease our reliance on oil from the Middle East. Most likely, that oil instead would go to China and India. But here's the problem - the technology, equipment and good old-fashioned know-how aren't necessarily up to the challenge these deep oil rigs require. Salt water corrosion, high oil temperatures, huge pressure changes and the depth of the drilling all pose problems the oil companies have to solve for those fields to be viable. And solving those will be higher-cost propositions. So, far from defeating the peak oil theory, these new and challenging finds in some ways support it. Looking Forward The Peak Oil theorists got a shot in the arm last week when the venerable International Energy Agency seemed to jump on board the Peak Oil theory. Here's what our Wall Street Journal said: For several years, the IEA has predicted that supplies of crude and other liquid fuels will arc gently upward to keep pace with rising demand, topping 116 million barrels a day by 2030, up from around 87 million barrels a day currently. Now, the agency is worried that aging oil fields and diminished investment mean that companies could struggle to surpass 100 million barrels a day over the next two decades. For a committed peakist, this was a big deal. A flat-out acknowledgment from one of the former skeptics that oil production is not guaranteed to continue to grow. The International Energy Agency will be releasing a report in November that will, for the first time, evaluate the health of 400 of the largest oil fields in the world. Delving deep into the supply side of things is a departure from the IEA, which typically focuses on forecasting demand, assuming that OPEC countries will make up for any supply shortfall. By introducing a supply review, IEA seems to be raising the possibility that OPEC may not be able to meet that demand after all.
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