Since the dawn of the Industrial Revolution, about 200 years ago, new sources of energy—such as coal, oil, and gas—have fueled the rapid expansion of industry, transport, trade, and agriculture, allowing the world’s population to grow sixfold. Oil and gas in particular, flowing from within the earth, led to an extreme net gain in energy and to much profit for the owners of oil fields. The tacit assumption was that a planet of infinite resources, together with human ingenuity and the power of free markets, would create more and more wealth forever.

The fallacy, of course, lies in the word “infinite.” Well-understood geological processes created oil: most of it was formed during two exceptional epochs of global warming, 90 million and 150 million years ago, respectively. It follows that oil is a finite resource, subject to depletion. It must also be found before it can be produced. The peak of discovery came in the 1960s; a corresponding peak of production must inevitably follow.

Depletion is a simple concept to grasp: as every beer drinker knows, the glass starts full and ends up empty, and the quicker you drink, the sooner your beer is gone. The same principles apply to oil. Beginning in the early 1980s, the world started using more oil each year than it found, and the gap has since widened: in 2007, for example, only about one barrel of conventional oil was found for every five consumed. It should therefore come as no surprise that oil prices rose from less than $17 a barrel in 1998 to a high of almost $150 in July 2008 (in 2007 dollars). The average cost of producing oil did not change materially over this period, so the increase represents profiteering from shortage.

All this suggests that the world, and the United States in particular, now faces a new oil age marked by the decline of oil and all that depends on it—from transporting people and goods to running factories. The transition threatens to be a time of great social, economic, political, and geopolitical tension. Indeed, there are already signs of turmoil, such as the food-price riots reported in many countries. The link between oil and food is obvious: modern mechanized agriculture in effect turns one into the other.

Some simple sums show the scale of the problem. Today, about 23 billion barrels a year of conventional oil support a world population of 6.6 billion people; by 2050, the supply will have fallen to about 8 billion barrels a year, enough to support only about 2.3 billion people at current patterns of consumption. We can move to soften the decline by producing more unconventional oil—from sources such as the tar sands of Canada, the few deepwater areas endowed with the right geological conditions, oil and gas from inferior reservoirs, and whatever the polar regions may offer (though they may not offer much). Oil from these sources, however, can do no more than slow the rate of decline.

This is not necessarily a doomsday scenario. We are far from running out of oil, for production from conventional sources is declining by no more than 2 to 3 percent a year. At current rates of production and consumption, there is enough oil for the rest of the century but at ever-declining rates of usage. Much can be done to adapt. One useful first step might be an oil-depletion protocol that would commit countries to cutting their imports to match the global depletion rate. That would reduce world prices by putting demand into balance with supply.

Biofuels and other forms of renewable energy, as well as nuclear energy, also have a role in the transition to the postoil age, but biofuels compete with food production, and uranium is a finite resource. The primary long-term objective must therefore be to find ways of using less energy. This probably speaks of an entirely new way of life, as people revert to more rural conditions by relying on local markets—a transformation that implies new political structures: greater local autonomy and even local currencies that facilitate simpler means of exchange.

Above all, we must inform the world’s people of the true position in regard to oil supplies, emphasizing that the limitations are imposed by nature and not a conspiracy by oil companies or the oil-producing nations. Appeals to the common sense of ordinary people can reap great dividends. The long-term adjustments required to thrive in the postoil era are great. The winners will probably be those who properly evaluate the situation and begin to plan their lives and businesses accordingly.

We may not have long to wait before the clear-thinking CEO of an oil company stands up to address the company’s shareholders, thanking them for their past support and saying that the company plans a highly profitable and well-managed contraction, with a view to closing the doors at a future date. Some airlines may continue to offer a few privileged seats, as of old, while others, premised on mass transit, fail. The tensions of immigration could decline as people who might otherwise have left their homelands instead find better and more fulfilling simple lives there. People may again sing and dance as televisions are switched off around the world.

Does this sound extreme? Perhaps. But we can say with assurance that the Petroleum Age will be over by the century’s end. The hope must be that it gives way to a new and more benign era, in which the world’s people live in better equilibrium with themselves, their neighbors, and, above all, the environment in which nature commands them to live.

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