I've decided that the peak oil problem is serious enough to warrant some further investigation. In the past few weeks I've spent some time getting up to speed on all the arguments, lurking through some of the peak oil forums, and doing some reading on energy production. I also saw the "The End of Suburbia", a film which I strongly recommend. What follows are my predictions for what will happen when the world gets past the peak of oil production. It is mostly an optimistic scenario, though a few caveats are inevitable. But if you're looking for gloomier predictions, than the Internet is your friend. (In my view, the tendency towards apocalyptic scenarios stems from a very skewed perspective on reality. Most doomers live in suburban America, a setting where life without a car seems impossible indeed. Moreover, they tend to be survivalists, another of those curious Internet tribes and one who gets its kicks from predictions of ensuing doom).

So, what assumptions did I make? First, that even though the peak in production might happen in the next few years (if not already), the yearly decline won't be too steep (some 2% a year in the first few years), allowing us to make a relatively smooth transition away from oil. Second, is that even though people are stupid, they're not that stupid.

Obviously, the further forward in time the peak happens and the shallower the decline, the rosier the future. If on the contrary the peak already happened and the decline is much steeper, then we could be in for a rough time. Predictions are always hard, especially about the future.

• When it becomes clear that the Saudis are unable to increase production to satisfy growing demand (possibly already around this summer), prices of oil will increase, perhaps even beyond the $100/barrel psychological barrier. However, I find it unlikely they'll go stratospheric any time soon. Though in the short term the price of oil is highly inelastic, the decrease in economic activity caused by the high prices will eventually reduce demand, easing the pressure on oil (in other words, there is a negative feedback loop built into the system).
• The economy will of course suffer from very high oil prices. In the US, this might be the extra push that causes the housing market bubble to burst. But overall I don't expect a huge tragedy or anything we haven't experienced before.
• In the first few post-peak years, noise in the system will make it difficult to assess the reality of the peak. A conflict in the Middle East, for example, will bring the prices up anyway, masking the underlying peak oil situation.
• Society as a whole is likely to go through the five stages of grief. First there will be denial, as people cling to flimsy hopes of discovery of new oil fields or easy switching to alternatives. Then there will be anger, obviously targeted at the politicians who let this happen (and in most cases rightfully so). Anger will be followed by bargaining, as people hope to maintain all their habits by making unrealistic concessions. Afterwards comes depression, when people finally realise that the era of cheap and easy energy is over. Finally, acceptance will come, when people adjust to new reality and try to make the most of it. To look at things from the optimistic side, I would had an extra stage of hope, since technology should allow us to overcome this period and to envision a future where energy is plentiful and clean.
• People will discover they can cope with significant reductions in consumption with virtually no disruptions to their lifestyle. Simple steps in energy conservation (such as more efficient light bulbs or setting the thermostat a couple of degrees lower in winter) will go a long way towards this goal. However, as far as petrol is concerned, most of the savings will come from increase usage of cycling and public transportation. European cities in particular, with high population densities and fairly good public transportation services to start with, will adapt very well to the new reality. In addition, telecommuting (bless the Internet) will become increasingly more common, thus also helping to ease the pressure on the transportation networks.
• Many of the steps already in place to fight global warming by reducing carbon emissions will also help us to cope with the decrease in oil production. And again, assuming that the latter decrease is not too steep, increased usage of renewable sources — together with stricter conservation measures — should allow us to balance the loss of oil.
• Once the reality of peak oil becomes established, research into alternatives will truly kick into high gear. People have suggested that the world needs a sort of Manhattan project dedicated to developing alternative energy sources. I would agree. The amount of money invested in fusion research, for instance, is ridiculously small if we consider the huge payoffs.
• There will be a lot of talk and hope about ethanol, but the truth is that what works in Brazil will not necessarily work in the Northern hemisphere. The problem is that the US and Europe cannot grow sugar cane because of their climates, and production of ethanol from corn is so inefficient that it requires almost as much energy to produce it than what can be extracted — this according to the more optimistic calculations. Therefore, until a major breakthrough happens, ethanol will not be a viable solution.
• Nuclear energy will make a comeback. Sooner or later people will realise that though as commendable as they may be, increases in wind and solar power alone will not be sufficient to cope with ever decreasing oil production. Yes, there will be some controversy and the usual round of protests, but eventually the reality will sink in that modern nuclear plants are perfectly safe, don't kill bunnies, and are still the most environmentally friendly solution.
• Interestingly, though all the steps taken to fight global warming have a positive effect on a post-peak world, the converse is not necessarily true. I am referring of course to coal, which is also likely to make a comeback. Countries such as China, with huge coal reserves and little concern for the environment, worry me the most, since they are very likely to resort to this quick but dirty fix.
• Locality will become more important. I don't expect the trends of globalisation to be fully reversed, but with rising transportation costs, producing goods closer to where they are sold will make more sense.
• Organic farming is likely to become more economically viable. The paraphernalia of modern agriculture is highly dependent on oil, not only due to mechanisation, but also because oil is used to make fertilisers and pesticides.
• The airline industry will suffer and cheap fares will be a thing of the past. Also, I wouldn't be surprised if in the current rush to expand and build new airports, many countries will find themselves staring at empty runways some ten years from now.
• Yes, there will be tension and quite possibly localised conflict in the Middle East. Nothing new there. In all doomer scenarios, this regional war inevitably escalates into a nuclear exchange between the US and China. But then, according to doomers a squirrel can hardly sneeze without it escalating into nuclear war. Personally, I find the doomer scenario highly unlikely. Though tensions between the US and China over oil resources are likely (fortunately Russia has plenty of oil of their own for now), their economies are far more interconnected than those of the US and the Soviet Union ever were. Armed conflict is therefore a remote possibility, and a nuclear exchange even more so.
• The internal situation in America does give me some reason for concern. In contrast to Europe, the suburbia-based urban development model used in the US is highly dependent on the car. There's just no way around it: the population density is far too low to make public transportation economically viable. And the huge distances involved make alternative means such as walking or cycling impractical. From an energy perspective, the suburbia was an insane idea.

  Moreover, I am concerned that rather than embarking on a serious reform of the american lifestyle, the US will opt for the easier solution of putting itself in control of the world's remaining oil. We've already witnessed Act I of this strategy (it goes by the name "Operation Iraqi Freedom"), and we're now watching the preparations of Act II unfold with regard to Iran.

• In a similar fashion, China is likely to experience serious growing pains. Following its spectacular growth rate, its thirst for oil has been increasing dramatically. Without access to cheap oil, that growth cannot continue. Moreover, China is already facing huge problems with pollution and environmental degradation. Burning more coal will not help the slightest bit.
• Africa as a whole will be screwed, because a) they'll be the first to be priced out of the oil market, and b) no matter what happens, Africa always gets screwed.