A rising number of people are familiar with the concept of Peak Oil, which posits that invidual wells and hence global oil production overall exhibit very predictable patterns of output, such that when the peak of that production from either a single well or all the wells will be reached is pretty easy to calculate.

The Peak Oil concept was developed all the way back in 1956 by a Shell Oil engineer named Dr. M. King Hubbert, who at that time predicted US crude oil production would peak around 1970. Most in the industry scoffed at the time. Turns out King was nearly right on the money.

On a global basis, many predict we have either already reached or soon will (next few years) peak crude production as well.

This week, we featured a Videocast on our Supply Chain Television Channel a converation with Chuck Taylor, a long-time logistics executive who has spent the last 8 years or so warning the industry about the impact of Peak Oil on our supply chains, economy, and even aspects of our way or life.

It was a fascinating discussion, and the on-demand version of this broadcast (made possible by support from Compliance Networks) is now available: The End of Cheap Oil.

During the broadcast, Taylor used the slide below, which paints the Peak Oil concept very clearly.

Source: Chuck Taylor, Awake! Consulting

The picture it paints is not a good one. First, look how few new reserves are being discovered, versus the huge oil field finds in the 1950-80 period (gray bars, versus small expected future finds in the yellow bars).

You can also see in the black line how production levels, despite rising overall global demand, have been flat-lining in recent years: just what you would expect with nearing Peak Oil.

The red dots indicate the amount of production needed to keep pace with demand. Something is going to have to give.

This is crude oil only, and does not consider other sources such as tar sands and shale oil. But as Taylor makes clear, with those sources oil doesn't just flow, as it does for traditional wells. It is therefore much more expensive to produce.

We aren't going to run out of oil any time soon, Taylor says. We are just going to run out of cheap oil.

We should all be concerned.

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