The depletion of existing sources is more rapid than any new sources that can be brought online. US production is in relentless decline - and that’s now happening worldwide. The overwhelming majority of petroleum geologists, scientists, and economists project global peak production being reached between 2005 and 2010. A report from the US Department of Energy, entitled Peaking of World Oil Production: Impacts, Mitigation, and Risk Management, draws the following disturbing conclusions:
 

• World oil’s peaking is going to happen, and will likely be abrupt.
  
  
• Oil peaking will adversely affect global economies, particularly those most dependent on oil.
  
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• Oil peaking presents a unique challenge (“it will be abrupt and revolutionary”).
  
  
• The problem is liquid fuels (growth in demand mainly from transportation sector).
  Mitigation efforts will require substantial time - 20 years is required to transition, without substantial impact. A 10-year rush transition with moderate impact is possible with extraordinary efforts from governments, industry, and consumers.
  
  
• Late initiation of mitigation may result in severe consequences.
  
  
• Both supply and demand will require attention.
  
  
• It is a matter of risk management (mitigating action must come before the peak). Government intervention will be required.
  
  
• Economic upheaval is not inevitable (“given enough lead-time, the problems are soluble with existing technologies”).

Considering that global oil production peaked or is peaking between 2005 and 2010, economic upheaval is now inevitable. In fact, the worldwide global recession is the only reason you aren’t paying $5 a gallon for gasoline today. Supply didn’t increase; demand leveled off.

World demand fell from 87 million barrels per in early 2008 to 84 million barrels per day in early 2009, a full 3.5% decline. If the world economy levels off and resumes growth, demand will immediately surpass previous levels. The problem: Production has peaked, and will likely drop below 80 million barrels in 2010. When demand is rising and supply is declining, only one thing can happen - higher prices.

The optimists dismissed the fact that oil prices reaching $147 a barrel had anything to do with constricting market fundamentals. Instead, they argued that lofty crude prices were merely a byproduct of a weak dollar, hedge fund speculation, geopolitical trepidation, downstream log jams, the Iraq war, Nigerian political turmoil and OPEC’s lust for high prices, which kept enormous spare capacity shut in. But the fact remains: Easily found cheap sources of energy are in terminal decline.

Few realize we get more oil from Mexico than we do from Saudi Arabia. We’re dependent on Mexico to supply us with 600 million barrels of oil per year. Without this supply, there would be shortages and much higher prices. Within 5 years, we’ll be getting zero barrels of oil per day from our neighbor to the south.

Virtually all of Mexico’s oil comes from the second largest oil field in the world - Cantarell. Run by the state-owned oil company, Pemex, it once held 17 billion barrels of oil. Pemex has provided 40% of all revenues for the state, which became so dependent that Pemex built a nitrogen injection project on top of the well to push the oil out faster.