'Running out of oil' is an old fear

Almost since the dawn of the oil age, people have worried about the taps running dry. So far, the worrywarts have been wrong. Oil men from John D. Rockefeller to T. Boone Pickens always manage to find new gushers.

But now, a vocal minority of experts say world oil production is at or near its peak. Existing wells are tiring. New discoveries have disappointed for a decade. And standard assessments of what remains in the biggest reservoirs in the Middle East, they argue, are little more than guesses.

"There isn't a middle argument. It's a finite resource. The only debate should be over when we peak," says Matthew Simmons, a Houston investment banker and author of a new book that questions Saudi Arabia's oil reserves.

Today's gasoline prices are high because Hurricanes Katrina and Rita disrupted oil production in the Gulf of Mexico. But emergency supplies from strategic oil reserves in the United States and abroad can largely compensate for that temporary shortfall. If the "peak oil" advocates are correct, however, today's transient shortages and high prices will soon become a permanent way of life. Just as individual oil fields inevitably reach a point where it gets harder and more expensive to extract the oil before output declines, global oil production is about to crest, they say. Since 2000, the cost of finding and developing new sources of oil has risen about 15 percent annually, according to the John S. Herold consulting firm.

As global demand rises, American consumers will find themselves in a bidding war with others around the world for scarce oil supplies. That will send prices of gasoline, heating oil and all petroleum-related products soaring.

"The least-bad scenario is a hard landing, global recession worse than the 1930s," says Kenneth Deffeyes, a Princeton University professor emeritus of geosciences. "The worst-case borrows from the Four Horsemen of the Apocalypse: war, famine, pestilence and death."

He's not kidding: Production of pesticides and fertilizers needed to sustain crop yields rely on large quantities of chemicals derived from petroleum. And Stanford University's Amos Nur says China and the United States could "slide into a military conflict" over oil.

Rising demand