"Petroleum geologists have known for 50 years that global oil production would "peak" and begin its inevitable decline within a decade of the year 2000. Moreover, no renewable energy systems have the potential to generate more than a tiny fraction of the power now being generated by fossil fuels."
Peak oil theory states: that any finite resource, (including oil), will have a beginning, middle, and an end of production, and at some point it will reach a level of maximum output.
Oil production typically follows a bell shaped curve when charted on a graph, with the peak of production occurring when approximately half of the oil has been extracted. With some exceptions, this holds true for a single well, a whole field, an entire region, and presumably the world.
The underlying reasons are many and beyond the scope of this primer, suffice to say that oil becomes more difficult and expensive to extract as a field ages past the mid-point of its life.
In the US for example, oil production grew steadily until 1970 and declined thereafter, regardless of market price or improved technologies.
In 1956 M. King Hubbert, a geologist for Shell Oil, predicted the peaking of US Oil production would occur in the late 1960s. Although derided by most in the industry he was correct. He was the first to assert that oil discovery, and therefore production, would follow a bell shaped curve over its life. After his success in forecasting the US peak, this analysis became known as the Hubberts Peak.
The amount of oil discovered in the US has dropped since the late 1930?s. 40 years later, US oil production had peaked, and has fallen ever since. World discovery of oil peaked in the 1960?s, and has declined since then. If the 40 year cycle seen in the US holds true for world oil production, that puts global peak oil production, right about now; after which oil becomes less available, and more expensive.
Today we consume around 4 times as much oil as we discover. If we apply Hubbert?s Peak to world oil production we estimate that approximately half of all oil that will be recovered, has been recovered, and oil production may reach a peak in the near future, or perhaps already has.
For more detail visit: http://peakoil.com
(Special thanks to pops @ peakoil.com for this primer)