The rise and fall of oil production

Conventional oil powers modern economies and provides around a third of the world’s energy. But many commentators forecast a near-term peak soon and subsequent decline in global production as the resource is depleted. Some expect this to lead to major economic disruption, with “non-conventional” sources being unable to fill the gap in the timescale required.

To date, the debate on “peak oil” has had little influence on UK energy policy. But a combination of strong demand growth, erosion of spare capacity and ominous warnings from analysts has heightened concerns. Global production increased only marginally between 2004 and 2008, despite record high prices. While the recession has reduced demand, prices remain around $80 per barrel and the cancellation and delay of upstream projects could lead to shortages when the economy recovers.

Two physical features of oil resources make a peak in global production inevitable.

Telegraph