...Now comes what appears to be the most powerful threat to oil's supremacy in a century: growing fears that the black gold is running dry. For years a small group of geologists has been claiming that the world has started to grow short of oil, that alternatives cannot possibly replace it and that an imminent peak in production will lead to economic disaster. In recent months this view has gained wider acceptance on Wall Street and in the media. Recent books on oil have bewailed the threat. Every few weeks, it seems, “Out of Gas”, “The Empty Tank” and “The Coming Economic Collapse: How You Can Thrive When Oil Costs $200 a Barrel”, are joined by yet more gloomy titles. Oil companies, which once dismissed the depletion argument out of hand, are now part of the debate. ...

But is the world really starting to run out of oil? And would hitting a global peak of production necessarily spell economic ruin? Both questions are arguable. Despite today's obsession with the idea of “peak oil”, what really matters to the world economy is not when conventional oil production peaks, but whether we have enough affordable and convenient fuel from any source to power our current fleet of cars, buses and aeroplanes. With that in mind, the global oil industry is on the verge of a dramatic transformation from a risky exploration business into a technology-intensive manufacturing business. And the product that big oil companies will soon be manufacturing, argues Shell's Mr Van der Veer, is “greener fossil fuels”.

The race is on to manufacture such fuels for blending into petrol and diesel today, thus extending the useful life of the world's remaining oil reserves. This shift in emphasis from discovery to manufacturing opens the door to firms outside the oil industry (such as America's General Electric, Britain's Virgin Fuels and South Africa's Sasol) that are keen on alternative energy. It may even result in a breakthrough that replaces oil altogether.

To see how that might happen, consider the first question: is the world really running out of oil? Colin Campbell, an Irish geologist, has been saying since the 1990s that the peak of global oil production is imminent. Kenneth Deffeyes, a respected geologist at Princeton, thought that the peak would arrive late last year.

It did not. In fact, oil production capacity might actually grow sharply over the next few years (see chart 1). Cambridge Energy Research Associates (CERA), an energy consultancy, has scrutinised all of the oil projects now under way around the world

...It is true that the big firms are struggling to replace reserves. But that does not mean the world is running out of oil, just that they do not have access to the vast deposits of cheap and easy oil that are left in Russia and members of the Organisation of Petroleum Exporting Countries (OPEC). And as the great fields of the North Sea and Alaska mature, non-OPEC oil production will probably peak by 2010 or 2015. That is soon—but it says nothing of what really matters, which is the global picture.

...If the world oil supply peaked one day and then fell away sharply, prices would indeed rocket, shortages and panic buying would wreak havoc and a global recession would ensue. But there are good reasons to think that a global peak, whenever it comes, need not lead to a collapse in output.