ON A sweltering Tuesday in midJuly, in the fields outside Pisa, Willem Kadijk scribbles notes as a ragtag troupe of doomsayers predict the end of 'the oil age'. With his shaved head, jeans and sandals, Kadijk blends into a crowd gathered under a white tent to hear of the coming calamity. The death of cheap, abundant crude, the forecasters warn, might unleash war and plunge the world into a second Great Depression.

That is not the prophecy of some apocalyptic cult. Kadijk, a hedge fund adviser, had flown from Amsterdam to attend a conference on a geologic theory known as peak oil. Proponents of this controversial idea say global oil production is now at or near its zenith. Once the flow crests and starts to decline . . . and some geologists say it already has . . . oil will no longer be able to satisfy the world's growing thirst for energy. The result will be the oil shock to end all oil shocks. The price of a barrel of crude will spiral to $200 and keep rising.

To the peaksters, today's energy crunch is nothing next to the pain that will follow.

"Peak oil is a reality, " says Kadijk, who works for Kepler Equities, an Amsterdam brokerage. He plans to start a fund to capitalise on what he sees as a looming crisis for the fossil fuel-based economy and the ultimate bull market in oil.

As energy prices soar and violence convulses the Middle East, the peak-oil movement . . . an unlikely alliance of geologists, physicists, oil industry consultants and environmental activists . . . is winning converts. Peak-oil ideas are bubbling up from scientific journals and offbeat websites. For the first time, the peaksters have begun to grab the attention of Washington and Wall Street.

US energy secretary Samuel Bodman, former head of oil firm Cabot, has asked the National Petroleum Council to investigate whether oil supplies can keep pace with demand. The US Government Accountability Office, a nonpartisan congressional watchdog, is due to release a study on peak oil this November. Roscoe Bartlett, a Republican, has formed the Congressional Peak Oil Caucus to sound the alarm.

"The world has never faced a problem like this, " Bartlett says. Everyone agrees we'll run out of crude eventually. Oil, after all, is a finite resource: the earth holds only so much of it. The controversial issue is when a global peak will occur, and what will happen then.

Too late for alternatives Colin Campbell, a British geologist who popularised the peak-oil theory in his book The Coming Oil Crisis, says world production of conventional oil, the kind that comes from gushing wells, is reaching its apex.

Society isn't prepared for the consequences, Campbell says. It's too late to develop alternative sources of power, such as solar cells, nuclear reactors and windmills, to fill the oil gap before energy prices soar, says Campbell, who has a doctorate in geology from Oxford and more than 40 years of experience in the oil industry.

"We have come to the end of the first half of the oil age, " Campbell says.

Nonsense, says Russ Roberts, a spokesman for Exxon Mobil, the world's largest oil company. Exxon Mobil, which has reaped record profits as the price of oil has surged, has taken out ads dismissing peak oil in US newspapers such as the New York Times.

The Texas oil giant says the peaksters are being alarmist. In all, the world probably has 4,000 billion barrels of oil left, four times the amount we have used so far, the ad says.

"The world is nowhere near running out of oil, " Roberts says. Exxon Mobil geologists believe global oil production will keep rising through 2030, he says. Cambridge Energy Research Associates, whose chairman Daniel Yergin is a leading peak-oil critic, says production will reach an "undulating plateau" sometime in the future.

"Our outlook goes to 2020, and we see no evidence of a peak, " CERA geologist Peter Jackson says. "Eventually, we will start to see a decline. There is still time to think about alternatives."

Predictions of an imminent oil famine are as old as the industry itself. When proO duction at the first US wells in Pennsylvania began to decline in the late 19th century, some people predicted the country would soon run out of oil. Then so much crude was discovered in Texas that the Texas Railroad Commission capped production to support prices.

In the past, Campbell or his disciples have forecast the oil peak down to the year or even the day, only to push back the fateful moment. In 1997, Campbell said it would occur in 2001. Now, he says total production, which includes oil from deepwater wells and fuel derived from natural gases, will reach its height sometime after 2010.

Kenneth Deffeyes, a geologist and professor emeritus at Princeton, first identified 24 November 2005 as the peak- oil date and then revised it to 16 December 2005.

Campbell says the exact day or year isn't important. What matters is that peak oil is coming, and soon. Production has begun to decline in more than a dozen countries, including the US, according to the BP Statistical Review of World Energy. Production at the giant Cantarell oil field in Mexico is likely to decline 8% this year, according to Mexican state oil monopoly Petroleos Mexicanos.

At a time when US president George Bush has urged the country to break its addiction to foreign oil, the fact is the US is becoming ever more dependent on overseas crude. US oil production peaked 36 years ago, in 1970, at 11.3 million barrels a day. Since then, output has fallen 39%, to 6.8 million barrels a day, or 8% of the world total, in 2005, according to BP.

Investors have started to listen to the peaksters. Billionaire Boone Pickens is a peak believer. So is Peter Thiel, who cofounded PayPal and now runs Clarium Capital Management, a hedge fund firm.

Pickens, Thiel and other investors are positioning themselves to profit from what they say will be the biggest oil squeeze of all time. Even some oil companies and industry veterans sound nervous. Chevron has run a series of full-page ads in US newspapers that highlight surging oil consumption and declare, "The era of easy oil is over".

Thierry Desmarest, chief executive of Paris-based Total, told the World Gas Conference in Amsterdam in June that global oil production would peak in 2020.

Matthew Simmons, whose Texas investment bank, Simmons & Co, trades oil and gas stocks, says Saudi Arabia's production may decline soon.

Chicken Littles Alex Cranberg, chairman of US independent oil company Aspect Energy, calls the peaksters Chicken Littles . . . misguided souls who think the sky is falling on their heads. Cranberg hired two people to dress in chicken costumes and hand out fliers dismissing peak oil at the conference Kadijk attended in July.

Like many veterans, Cranberg says market forces and technological advances will cure our energy ills. As oil prices rise, companies will be more willing to hunt for crude. They will invest in expensive deepwater wells and new technologies to wring more from existing fields. Consumers will start conserving energy. Even now, stock market investors and Silicon Valley venture capitalists are pouring billions of dollars into companies developing ethanol, solar power and other alternative sources of energy.

More and more, however, the peaksters are drowning out everyone else, Cranberg says. "You can't turn around without seeing or hearing these ideas, " he says.

You don't have to be a geologist to understand why. The price of crude has tripled since 2000. In the US, $3-a-gallon gasoline has sapped consumer confidence. Nearly half of Americans believe the economy is doing poorly, according to a recent Bloomberg/Los Angeles Times poll. Fifty-nine percent of Americans expressed a negative view of Bush's handling of the economy.

"If oil was still at $20, no one would be talking about peak oil, '' says Manouchehr Takin, senior petroleum upstream analyst at the Centre for Global Energy Studies, a London consulting firm. High oil prices are only part of the story, however. The world is straining to feed its energy habit.

Today, we consume 85 million barrels of oil a day, according to the US Energy Information Administration (EIA). By 2030, the world will devour 118 million barrels a day, as China and India emerge as economic superpowers.

No one knows for sure how much oil the world has. That's a big question mark because the peaksters say production will max out once half of the oil has been pumped. So far, we've extracted about one trillion barrels in all. In 2000, the US Geological Survey estimated global resources at three trillion barrels, enough to push peak production out to 2037, according to the EIA. Campbell puts the total lower, at 2.5 trillion barrels.

Oil is certainly getting harder . . . and more expensive . . . to find and extract. Oil discoveries plummeted to five billion barrels in 2005 from 90 billion barrels in 1964, according to Campbell. "Discovery is in long-term decline, and spending more money won't increase it, '' says Chris Skrebowski, editor of the Petroleum Review Oil companies have to find enough crude to offset dwindling production at existing fields, which can decline by more than 8% a year, and to keep pace with rising demand. Most of that increase will have to come from members of the Organisation of Petroleum Exporting Countries, which are often cauldrons of discontent. The cartel's members . . . Algeria, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela . . . together sit atop 75% of the world's reserves and account for about 42% of total production, according to BP.

In its 2005 Energy Outlook, Exxon Mobil says the combined production of non-Opec countries will peak sometime from 2010 to 2020. Opec will be able to fill the gap, the report says. Opec produced about 30 million barrels a day in 2005; by 2030, it would have to churn out 47 million barrels a day . . . almost 57% percent more than last year . . . to satisfy the world's needs.

"We believe the resource base will support this increase, assuming that investments in development are made in a timely fashion, '' the report says. Opec countries will invest a combined $100bn in the five years to 2010 so they can increase output, Opec spokesman Omar Ibrahim says. "We are set to meet the extra call on Opec to 2030, '' Ibrahim says.

Struggling to keep up Yet even now, Opec nations are struggling to keep up. Since 2000, Opec has gradually lost the spare pumping capacity its members can use as an emergency reserve to moderate prices. The cushion has dwindled to about 1.5 million barrels a day from six million barrels a day, Takin says.

What's more, neither the peaksters nor oil industry executives know for sure how much oil Opec has and how much it can actually produce. Opec countries haven't been transparent about their reserves or production capacity, says Mike Rodgers, a partner at PFC Energy.

"Opec is the big unknown, " he says.

Many analysts believe Opec nations began overstating their resources in the 1980s, when the cartel linked production quotas to the size of members' reserves, says Mamdouh Salameh, an independent oil economist. In the late '80s, cartel members raised their reserve estimates by a combined 300 billion barrels even though none of them had actually found much more oil.

In his 2005 book Twilight in the Desert:

The Coming Saudi Oil Shock and the World Economy, Simmons says the Saudis have pumped so much oil so fast that the country's biggest oilfields face declining output.

"Saudi Arabia is keeping everything in the dark, '' Simmons says.

Saudi officials have dismissed peak-oil theorists and suggestions that their country is running on empty. The precarious balance of supply and demand in the oil markets became even clearer in early August when BP announced it would temporarily shut down its Prudhoe Bay oil field in Alaska because of pipeline corrosion. The news drove already high oil prices up more than $2 to almost $77.

Prudhoe Bay, the largest oil field in the US, is part of the peak-oil story. The field was discovered in 1968 and came on stream in 1977. Since then, it has yielded more than 11 billion barrels of oil. Yet even before the August mishap, this vast field had begun to die. Its output has fallen 73% to 400,000 barrels a day from a height of 1.5 million barrels a day in 1989.

Prudhoe Bay is following the life cycle of oil fields around the world, a phenomenon known as the Hubbert Curve, which takes its name from M King Hubbert.

Fifty years ago, Hubbert, then a geologist at Shell Oil's research lab in Texas, postulated that US oil production would follow a bell-shaped curve. At the 1956 meeting of the American Petroleum Institute, he predicted that total annual US output would climb steadily, level off sometime between 1965 and 1970 and then decline after about half of the country's reserves had been depleted.

The US reached what geologists now refer to as Hubbert's Peak in 1970. Hubbert died in 1989 at the age of 86. It wasn't until the late 1990s that his ideas began to reach a wide audience via Campbell, the British geologist. Now in his eighth decade, Campbell is a grandfatherly man with a shock of gray hair. He hardly comes across as a doom-monger. He works out of a two-storey house in Ballydehob, Co Cork.

Campbell spent 40 years exploring for oil for Amoco and other companies. He helped Amoco search for oil in Ecuador and then, during the 1980s, led its exploration in Norway. He later joined PetroFina, the oil exploration company now owned by Total. After retiring from PetroFina in 1990, Campbell joined forces with Jean Laherrere, a retired French geophysicist who had spent 25 years working at Total, to analyse production profiles for the world's countries.

Campbell says he and Laherrere, now 75, looked at their data and concluded global oil production was approaching its zenith. In 1998, they co-wrote an article for Scientific American titled 'The End of Cheap Oil', that helped popularise their cause. "The world is not running out of oil, at least not yet, '' Campbell and Laherrere wrote. "What our society does face, and soon, is the end of the abundant and cheap oil on which all industrial nations depend."

Environmental crusaders In 2000, Campbell founded the Association for the Study of Peak Oil and Gas, an informal organisation for fellow travellers.

Now known as ASPO International, the group has sponsored five annual conferences, including the one in Pisa in July, which drew more than 230 people. It's now run by Kjell Aleklett, a physics professor at Uppsala University in Sweden. Twenty independent national ASPO groups have sprung up around the world, from Australia to France to the US.

Many peaksters are driven by a moral imperative to spread the word. Campbell says he's a scientist, not a social or environmental crusader. Even so, he says he's worried that oil has harmed human society and the planet. Since the Oil Age dawned, nearly 150 years ago, the earth's population has soared six-fold, he says.

"Man is the only animal that uses external energy, '' Campbell says. Asked why he has championed the peak-oil theory, Laherrere quotes Antoine de Saint-Exupery, author of The Little Prince: "We don't inherit the earth from our ancestors; we borrow it from our children."

Activists have jumped on the peak-oil bandwagon and added their own, often strident, voices to the debate over the future of oil. Writer-activist Jim Kunstler says peak oil will ultimately destroy suburbia and plunge the US into a violent dark age of feudalism. "The question is, Can we run our shit the way we are running our shit?" Kunstler says. In 2005, Kunstler wrote The Long Emergency: Surviving the Converging Catastrophes of the TwentyFirst Century, which warns of the havoc to come.

Lifeaftertheoilcrash. net, a website run by peak-oil entrepreneur Matt Savinar, warns, "Civilisation as we know it is coming to an end soon". The site sells peakinspired books and products, including an investor's guide to peak oil. Another site, dieoff. com, says wars over oil and other natural resources will eventually erupt and millions of people will be wiped out.

Stephen Andrews, an energy consultant who founded ASPO-USA last year, says the alarmists have hurt the peak-oil movement. "The peak-oil tent has different voices . . . some shrill, some more sober . . . reaching different conclusions from the same facts, " Andrews says. Andrews has attracted more-sober voices to the movement.

Last November, Denver mayor John Hickenlooper helped co-sponsor a twoday peak-oil conference organised by Andrews. "I think the people most exuberant about peak oil underestimate how much unconventional sources of oil will help flatten the peak, but to say there is no peak is shortsighted, " Hickenlooper says.

The world would have to embark on a crash mitigation program 20 years in advance to prevent peak oil from hobbling the global economy, says Robert Hirsch, a senior energy programme adviser at research firm Science Applications International. "And I consider myself an optimist, '' says Hirsch, who estimates such a programme would cost the world $1 trillion a year.

Some investors and analysts see lots of opportunities in a post-peak world.

Charles Maxwell, senior energy analyst at Weeden & Co, says high oil prices will spur companies to invest in unconventional sources. Few people, however, realise how much such projects will cost or how long they will take to come on stream, he says.

Clarium Capital's Thiel says he began thinking about peak oil in 1999. As the internet bubble grew that year, Thiel says he started to wonder about other risks that investors might be ignoring and seized on the uncertain future of oil. "Energy will be systematically undervalued until peak oil is priced in, '' Thiel says. He's bought shares of EnCana, which has invested in exploration and new production, and of oil services companies like Schlumberger and Weatherford International, which stand to profit as explorers hunt for oil. Thiel says he's leery of US oil majors such as Exxon Mobil, because they may become targets of new taxes once the government wakes up to peak oil. Thiel himself says the peak will come by 2008, if it hasn't already.

"Geology will trump technology, '' he says.

(Bloomberg)