I would be a strong candidate for the "Understatement of the Year award" if I were to say that the Internet is full of the most curious and diverse tribes. This post is about one of them, whom I like to call the "Peak Oil intelligentsia" (POI, for short). Now, the Peak Oil theory is nothing new. It was first proposed by M. King Hubbert in the mid-1950s, and hence it is sometimes also called the Hubbert Peak Theory. It basically states that oil production is expected to follow a bell-shaped curve, allowing the prediction of when production is about to peak and to inevitably decline. (As always, if you want all the details, the Wikipedia is your friend).

Peak Oil's predictive power has been to a certain extent validated by a concrete real world example: the decline in oil production in Texas during the 1970s. And since then, the POI has been looking for the tell-tale signs that the same phenomenon would be about to happen in other large producers and the world as a whole. They gather in quite a large number of discussion forums and weblogs, as google will merrily tell you. And in true Internet fashion, among those genuinely concerned about the issue but who maintain some degree of salutary scepticism, you will find all sorts of conspiracy theorists, oh-my-god-we're-all-gonna-die doomsayers, and of course, the usual blend of survivalists getting their guns ready for what they say will be a Mad Max post-oil peak world.

Being the world's top producer, no country has been more closely watched than Saudi Arabia. A year ago, an interesting article in Kuro5hin addressed the possibility that Saudi production might be in fact approaching its peak. However, the signs were still relatively ambiguous, and much more prosaic non-Peak Oil explanations could be found for the data. (If you are wondering why so much secrecy and ambiguity surrounds this issue, bear in mind that Saudi Arabia is also one of the most closed, backwards, and repressive regimes in the world. In a democracy, outsiders would not have to be guessing about the true nature of oil production and reserves. The information would be out there, available for anyone to analyse. But the situation in Saudi Arabia is quite different. They could very well be in a troublesome situation and the rest of the world would only find out when the oil stopped coming).

One year has passed, and an analysis of Saudi oil production in 2006 seems to vindicate the hypothesis that the Saudis are indeed past their peak. Their production actually decreased by 8% last year, and a number of other ominous signs (such as a frantic rush to build more rigs and a marked decrease in the quality of the crude) seems to indicate that this decrease was not intentional. If true, this means that their production will decline even further this year, which given the very tight margin between the worldwide supply and demand of oil means that prices are very likely to rise significantly within the next year. And from then on the situation only gets worse.

This news has to be taken with a grain of salt, of course. The Saudis themselves claim that all is fine, that despite numerous claims to the contrary, Ghawar (the largest oil field in the world and the target of most speculation) is in perfect health, and that they are very well capable of actually increasing production if the need arises. Well, sooner or later something will happen that will force the Saudis to show their cards. It might be the increased demand when summer arrives to the northern hemisphere, a crisis triggered by some boneheaded manoeuvre by the Americans against Iran, or even a major hurricane disrupting production in the Gulf of Mexico. Only then will we know if they are indeed telling the truth and that there's little reason for concern (at least for now).

Peak oil or not, Saudi Arabia is a disaster waiting to happen. Combine a thousands-fold parasitic aristocracy with the disenfranchised masses, add a hint of out-of-control population growth and the consequent decline in average living standards, and mix it all up with decades of investment in extremist religious schools. The result is not pretty. And as if that weren't enough, most of the oil is located in the shia-dominated areas. Now, the shiites have long been an underclass in saudi society, subject to discrimination by the sunni majority (well, strictly speaking the majority follows Wahhabism, a branch of Sunnism). Understandably, this is the sort of imbalance that is bound to cause trouble sooner or later. And indeed, sectarian tension has been rising, in particular since the start of the civil war in Iraq. Come to think of it, Peak Oil might be one of our smaller problems as far as Saudi Arabia is concerned.