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Peak oil is a theory that global oil production will eventually reach a maximum rate, after which it will decline, possibly quite precipitously. The concern is that because most of the world relies heavily on petroleum products, the fall after the peak of production could spark a number of social, political, and economic problems with potentially far-reaching effects. There is some dispute as to exactly when peak oil will manifest, and what will happen when it does, but most people agree that the theory should be used as an incentive to develop alternative sources of energy before it is too late.
This theory was originally posited in 1956 by M. King Hubbert, and it is sometimes known as the Hubbert Peak Theory. Hubbert was actually looking at petroleum production in individual countries, but it was clear that the theory could be extended to the world in general. Some countries appear to have already experienced peak oil, while others are still experiencing climbing production rates, thanks to the development of advanced technology for oil extraction.
Several factors go into peak oil, making it difficult to predict; many people think that we will only realize we have reached our global peak after the peak passes. Demand is an obvious factor, as increased demand places a heavier load on oil supplies and reserves, and the growing human population plays a role in peak oil as well, especially in countries which are striving for a higher standard of living. Changes in the way people live, farm, and travel have also altered the equation significantly.
One of the biggest fears behind the peak oil theory is the potential for a situation where there is not enough oil to supply the world's needs. In such a situation, countries with reserves or active production facilities could find themselves in a very awkward position, and the price of oil could climb dramatically in countries where it is in short supply. Climbing oil prices could trigger economic chaos, as the prices of other commodities like food are closely linked with oil prices, thanks to the heavy use of petroleum in a wide variety of industries.
Because a peak oil crisis could be monumentally devastating, people who support the peak oil theory argue that alternative technology needs to be designed to replace petroleum. Because peak oil cannot be predicted, it is argued that this technology should be developed and implemented sooner rather than later. Other people feel that peak oil will probably manifest in the form of an oil plateau, meaning that production rates will stagnate for some time before dropping, giving the world some warning, and time to address the situation.