There is a finite amount of oil in the ground. As it becomes scarcer, its price will increase. When the demand outstrips the supply, the price will increase rapidly.
"As we hit the peak, soaring prices - $70, $80, even $100 a barrel - will encourage oil companies and oil states to scour the planet for oil. For a time, they will succeed, finding enough crude to keep production flat, thus stretching out the peak into a kind of plateau and perhaps temporarily easing fears. But in reality, this manic, post-peak production will deplete remaining reserves all the more quickly, thus ensuring that the eventual decline is far steeper and far more sudden."
I will write more about this soon, but for the moment you should read the entire short piece from the Los Angeles Times.
Posted by Alan at 08.03.04 00:37