"The peak in oil production does not signify `running out of oil,' but it does mean the end of cheap oil, as we switch from a buyers' to a sellers' market." – Energy Bulletin's "peak oil primer"
It's the summer of 2006. Osama Bin Laden warns the United States against becoming involved in Somalia. Mexicans elect a new president. And the international community strongly condemns North Korea for its testing of long-range missiles.
But only one event during this time could go down in the history books as forever changing the course of industrialized economies. The summer of 2006 is when the average amount of crude oil pumped out of the ground reached about 85.7 million barrels a day, according to the International Energy Agency.
That, say many followers of "peak oil" theory, is about as good as it's going to get.
And with spot oil surpassing the symbolic $100 (U.S.) mark yesterday for the first time, before easing slightly to close in New York at $99.62, more market watchers are asking: Has global production of oil hit a wall?
"You never know you're at peak until after the fact," says Jeff Rubin, chief economist of CIBC World Markets.
But with 18 months behind him, Rubin is increasingly convinced the days of easy, plentiful oil are gone. Even if December data show record production in the fourth quarter of 2007, there's growing consensus that, at the very least, oil supply has reached a plateau.
"I just don't think we're going to see increases in conventional oil production any more," Rubin says. "I think (peak oil) is here."
So do citizens of a local group called Post Carbon Toronto, created in 2004 to "learn about peak oil and its consequences."
The group holds a public meeting every month, and has for more than three years, to discuss what the city and country can do to avoid the local impact of what they believe is a certain global energy crisis.
Their concern is understandable. Peak-oil theory suggests that once we've passed peak production, rising demand combined with declining output will cause oil prices to soar, perhaps dramatically as the potential for conflict escalates in many oil-producing countries.
Daniel Lerch, author of Post Carbon Cities: Planning for Energy and Climate Uncertainty, says knowing the exact date of peak oil isn't what's important.
"What matters is that oil prices will become volatile and progressively higher when demand increases and supply can't keep up."
If panic sets in, many contend the situation will spark a global depression.
Only those regions that wean themselves substantially from fossil fuels, by switching to emission-free energy resources such as renewables and nuclear, will be able to weather the economic storm.
Hence the name "Post Carbon Toronto."
After meetings, this diverse group of "peakists" – retired academics, former city politicians, engineers, scientists and even one restaurant manager – often go to a nearby pub to passionately debate the issue over a beer. In between meetings they continue the dialogue through an email list, allowing the sharing of information and forwarding of magazine and newspaper articles that add evidence to their belief that peak oil is here.
"Even if the optimists are right, their peak prediction of 2030 is scary enough," says Jim Lemon, 78, a retired geography professor from the University of Toronto who has been following the peak oil debate for roughly a decade.
Lemon, like most moderate peakists, doesn't count so-called unconventional oil when discussing peak theory. He knows there's lots of hard-to-get petroleum in oil shale deposits located in Colorado, Utah and Wyoming, and in Alberta's tar sands.
At issue for him is the black gooey stuff that made the Beverly Hillbillies rich – the "black gold" or "Texas tea" that bubbled out of the ground after a stray bullet from Jed Clampett's shotgun struck ground.
The Organization of Petroleum Exporting Countries currently account for about 40 per cent of this easy oil, and the debate centres on whether countries such as Saudi Arabia can, as they claim, increase their output at will.
"The OPEC countries are very secretive about what they've got, and that's part of the problem," says Lemon, adding that retired oil-industry workers from the Middle East often debunk reports coming out of OPEC. "They're all saying the same thing: It's not as good as what we're saying officially."
Peakists also get their information in other creative ways.
According to Lemon, "some guy upstairs over a bakery in Geneva" has eyes on the ground that count each day the number of oil tankers leaving the Strait of Hormuz, a narrow and highly strategic passage that carries one-fifth of the world's oil supply.
But even the "official" scenario is beginning to change. The International Energy Agency, which over the years has been relatively optimistic about oil output, was uncharacteristically gloomy in November with its latest outlook.
"Although production capacity at new fields is expected to increase over the next five years, it is very uncertain it will be sufficient to compensate for the decline in output at existing fields and meet the projected increase in demand," the agency said, declaring a trend that could threaten the world's energy security.
MP Dennis Bevington, the federal New Democratic Party's energy critic, is worried that the Canadian government isn't taking peak oil seriously enough. In November, he made a statement in Parliament that called for public discussion of the issue, and emphasized the need for a national energy strategy that anticipates the coming energy crunch.
He calls it "disturbing" that most members of Parliament have been silent on the issue, even as oil prices dance around the $100 mark. The government is "telling a lie," he says, when it links the country's energy future to the tar sands and other dirty and expensive sources that, by many estimates, won't compensate for steady declines in conventional oil production.
Many oil analysts and executives are quick to point out new finds in the Gulf of Mexico, such as Chevron Corp.'s Jack 2 well about 430 kilometres southwest of New Orleans. The ultra-deep-water well is said to have anywhere from three to 15 billion barrels of recoverable oil-equivalent reserves.
A similar deepwater find off the coast of Brazil, about 7.2 kilometres beneath the ocean's surface through sand, rock and salt, could produce up to eight billion barrels. But Bevington says ultra-deep-water wells are costly, risky and take a long time to develop.
"These areas that require intensive, long-term investment of capital and engineering, like the tar sands, just can't develop fast enough to fill the gap that this easy conventional oil we've been living off for the last 100 years has been supplying," he says.
"You could say, you're crazy, there's lots of oil out there in the world, but it's so hard to get now, the ability of these industries to mobilize the manpower and equipment in this already overcharged energy industry is very difficult."
Besides, says CIBC's Rubin, headline-grabbing "finds" such as Jack 2 don't tell the whole story. "Jack means nothing in the grand scheme," he says. "What people have to realize is that we lose several Jacks every year to depletion."
Meanwhile, a number of individual oil giants are showing signs their own production has peaked, including Shell, BP, Conoco-Phillips and ExxonMobil. Many have lost their rights to develop in countries such as Venezuela, shrinking both the market and opportunity for growth.
It's why, as far as Rubin is concerned, BP broke its promise not to invest in Alberta's oil sands at risk of tarnishing its green image. It's also why major consolidation in the oil sands is inevitable, and could be Canada's biggest business story in 2008.
"The world is getting smaller and smaller for these guys," says Rubin. "When you're schlepping through barrels of sand to get a barrel of oil you're into the bottom of the 9th here. This isn't exactly low-hanging fruit, but where else is there to go?"
The effects of peak oil won't necessarily plunge the world into depression, but higher and higher energy prices will change the way we do business. Rubin suggests there will be a reversal of globalization trends, such as a return to regional economics.
"Distance is going to start costing on a scale never seen before, at least not in the context of post-war economies," Rubin says.
"So that's bullish for somebody in the Holland Marsh.