How is this different from the current situation? Or the situation for most of this century?

The downward production sloping curve is unlikely to be smooth on any timescale relevant to you and I. When production is at a maximum, and there are natural disasters or wars that reduce the availability of oil, there will be spikes in oil price that will be disastrous for those whose way of life is dependent on continued cheap oil supplies i.e. almost everyone in the developed world.

The plateau, because of insufficient slack, may well be marked by price spikes. But, in the long run, there’s more oil producible at reasonable economic cost than we can afford to burn. Anytime, a wise economic course requires collective human self-restraint, there be danger.

The major industrial nations are about to start riding down the bell curve without even noticing. James Howard Kunstler should be happy to have his ideas confirmed.

the theory of “peak oil” is that the amount of energy consumed in producing consumable petroleum products—e.g. fuels—will gradually increase, both because greater effort has to be expended in extraction, and because the quality of extracted petroleum declines. That’s the supply side.

On the demand side, the demand curve is shifting, due to the rapid economic growth of industrializing countries, but the long-run elasticity of demand remains significantly greater than “1”. The upshot of this combination is that there is an effective ceiling on long-run price, but as long as the world is in the current plateau period, there will be too little reserve production capacity in the supply chain. (Why would anyone invest in greater capacity, when everyone knows physical throughput will decline?). The price of oil and derived consumable products is subject to price spikes, in response to any disruption in the supply chain, because there is too little slack in that supply chain. Such spikes are expected to spur investment in alternative energy sources, bringing to bear the high long-run elasticity of demand.

As actual production declines from the current plateau, slack in the (then over-built) supply chain will increase substantially everywhere except the fields (and that will be adequately compensated for by storage), and price “spikes” will disappear.

That’s when the real political fight over global warming issues will begin—as countries and regions where economic development has lagged are tempted to exploit petroleum as an energy source, keeping high-pollution consumption high.

Isn’t there something about the price-inelasticity of demand for oil that changes your conclusions? When enough of the economy (namely transportation) is based entirely on oil, doesn’t that mean demand can only drop so much in the face of rising price? I’m not a big peak-oil zealot, but isn’t there some real concern that a sufficiently precipitous drop in supply could cause a widespread increase in the price of everything that needs to be moved from one place to another at any point in its supply chain and, that category including essentially everything, cause a general downturn or “crash” in the economy? Is there some way to determine how steep the supply drop-off would have to be for it to really have an impact on the economy as a whole?

Meanwhile, although supplies have been going neither up nor down, the number of people who want oil hasn’t stopped going up.