I am concerned that the actual downside of the curve may look very different from the shape envisioned by Hubbert. The problem is that the limiting factor is likely not geology, but the failure of complex networked systems, particularly the financial system. Below the fold I show one view of what future oil production could look like, assuming the current unwind in world debt destabilizes the world financial system, and it becomes necessary to rebuild the system almost from scratch.
Peak oil -> higher oil prices, but little additional production-> stagnant wages -> little discretionary income -> cutbacks in buying many discretionary items -> layoffs (restaurants, newspapers, many businesses)-> more loan defaults -> banks not in a position to lend as much because of losses on loans -> debt harder to obtain -> lower demand -> lower prices on other commodities, like food -> more defaults and layoffs -> banks in even worse shape -> etc.
These cycles are leading to a huge unwind of debt that has barely begun. - TheOilDrum.com
This graph is kind of scary, but it is also somewhat comforting. A person gets the idea that while there will be a decline, production will not go down too rapidly. Because of the apparently slow decline rate, it looks like we should be able to get along pretty well with a little adaptation--perhaps some electric cars.
I obviously don't know precisely what would happen to world crude oil production if the world's financial system crashes, but here is one possibility:
Our financial system is debt based. Since 1971, the financial system has no tie to gold or any other physical standard. Instead, in our fractional reserve banking system, money is formed through the issuance of debt. The more debt that is issued, the more money there is, and the more demand there is for goods and services. As long as the system is growing, the system works well, because paying back debts with interest does not put too great a strain on the system.
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