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What is Peak Oil?

Peak oil is the point in time when oil extraction has reached its maximum economic rate. It is happening about now!

Some analysts claimed that peak oil happened ten years ago. Others, that it will happen by 2020. The differences are academic. We are at the end of the era of cheap oil.

We are not about to run out of oil. There is at least as much still in the ground as we have used so far. Oil is going to get progressively more difficult to extract and inevitably more expensive. At the same time demand for oil is forecast to rise as the world moves out of recession. The market pressures of dwindling supply and rising demand can only have one consequence. Prices will rise.

The effects of Peak Oil
Rising oil prices have a much wider effect than just making a visit to the garage more painful. Everything is affected. Fertiliser, made from oil, get more expensive. Diesel fuel for transport - more expensive. Plastics for packaging - more expensive. The price of everything rises, from carrots to conservatories.

If the change in the price of oil is smooth and predictable then it could be accounted for and balanced by wage rises and inflation. It won't be. The energy market is much more likely to become very volatile with large swings up and down - though mostly up. Some products, even some thought of as basic, could be priced out of the market as the escalating cost of their embedded energy makes them unaffordable. Other distortions will raise their heads. Biofuel refineries could well become a more profitable destination for food crops than supermarket shelves.

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