Demand has been lower due to the global recession -- there is no indication that oil production can't go higher than ever before, once demand starts picking back up.

Which has the higher bound -- the amount of oil we can pump out of the ground in a given day, or the demand for that oil given that we have 1 billion new members of the middle class over the last 25 years alone?

What about the next billion?

Wrong question - 25 from years from now, our aggregate energy needs will certainly have increased, but we will have had ample time to adjust for the decline in oil reserves by substitution and per-capita demand reduction, which is relatively elastic over longer terms.

If we wanted - and anyone who questions the existence of political will is right to be worried - we could replace our oil fuel use almost entirely over that timespan with nuclear power. I know, there's a peak uranium issue as well.

On the other hand, Europe and the US now find themselves awash in natural gas, which is a pleasant reversal of where we expected to be a few years ago; and renewable power generation is becoming price-competitive and deployed in sufficient volume to yield economies of scale, so we can reasonably hope for that trend to continue over the next 25 years too. I don't think we need to resurrect Thomas Malthus just yet.

The political will issue is a tough one, since 45% of the electorate is adamantly opposed to any attempt by government to alter the incentives in play on principle. That means we need perfection from the remaining 55%. I'm not holding my breath.

And what do you think triggered the global recession, if not an oil price that spiked to an economy-busting $147/bbl in the two years after production peaked at 85 mbpd?

Ummmm... I kind of thought it was the combination of a US housing bubble in combination with poor risk management in the financial industry particularly respecting mortgates.

And you believe that!!!

In many ways it was a final inflation of the bubble, as profit-takers getting out from a structurally unsound housing & CDO market looked for somewhere to park their excess cash and found a delightfully under-regulated exchange on which to do so. A great number of the oil future contracts were traded on an exchange called ICE, which had managed to set itself up in such a way that both US and UK financial regulators each thought the other was supervising it, when in fact neither were. It's a rather convoluted story that hasn't really been told yet, as it was overshadowed by subsequent events. the reasons I don't think it directly caused the full-scale market collapse are that a) no big banks got massively exposed to the oil price inflation - they could see it was speculative, and it inflated and popped so quickly that they never structured their positions around it; and b) the subprime market and all the other distortions (zero down, stated income, etc.) were already looking ropey by then.

Soaring oil prices might have pushed a few consumers over the edge into mortgage default, but even if that hadn't happened I think the market would have imploded within a few months of the 2008 election anyway. Recall that Bear Stearns had to put up $3.2 bn to rescue its two hedge funds in June of 2007, and Merrill Lynch's inability to sell more than about 12% of the CDO assets it seized was the first clue (for the public at large) that the financial industry had a systemic rather than a localized problem - and this was almost a year before the oil price spike. By the time that occurred, the stock market was in decline, Bush had already administered a $145 bn stimulus (remember that $800 tax rebate in 2008?), Bear had collapsed, the NY Fed had underwriting their acquisition by JP Morgan to the tune of $25 billion. So our economy was already in poor shape by March of 08, which was when oil prices suddenly took off like a rocket. At the time, I wondered if the sudden rise was in response to the structural weaknesses in the US and European economies, which shared both enormous housing booms and huge amounts of counterparty risk: it seemed as if traders were looking at oil as a substitute currency (energy is a much better candidate for solid money than gold) and using it to impose a sort of reverse devaluation of the dollar and euro. With hindsight I don't really think so, though - it was a simple pile-in rather than the dawning of a new economic concept.

BTW thanks for that CIBC paper you linked to below - although I don't quite agree with the 'big picture' analysis it's still a great read.