Oil market’s rally is a classic case of fear

…Then there’s the theory of peak oil — the notion that any finite resources will have a beginning, middle and end of production, according to PeakOil.com.

“The theory of peak oil is no longer just theory,” said Kevin Kerr, editor of Global Resources Trader, a newsletter of MarketWatch, the publisher of this report.

“As the market knows, key fields are disappearing,” he said. He points to Mexico’s Cantarell oil field as an example.

Production from Mexican state oil company Petroleos Mexicanos has been on the decline since reaching a record 3.38 million barrels per day in 2004, with the main cause of the drop being the decline in crude output at Cantarell fields, according to Dow Jones Newswires.

“On top of losing key fields like in Mexico and Venezuela, the scenario in 2007 is far different than in 1997,” said Kerr. “The turkeys of the past and lack of innovation, infrastructure investment and soaring demand are coming home to roost.”

MarketWatch