National and international energy agencies have long downplayed the statistics and significance of oil depletion. Finally, in Wednesday's World Energy Outlook 2008 report, the Paris-based International Energy Agency conclusively recognized the reality of "Peak Oil" and the magnitude and implications of large annual decline rates on the world's annual oil production.

While the IEA's report is groundbreaking in acknowledging the problem, the Association for the Study of Peak Oil and Gas USA (ASPO-USA) finds unwarranted optimism in the report's projections of oil production that are inconsistent with known decline rates - acknowledged in the report at more than six percent per year.

"Years of data from the majority of oilfields around the world show steady or declining production," says Steve Andrews, co-founder of ASPO-USA. "Most major oilfields were found decades ago, and those reserves were easy and inexpensive to extract. Since then, few new fields have been discovered to replace those reservoirs. Now, oil is technically more difficult and financially more expensive to produce, and the demand trend should continue to rise, despite the recent slowdown. We anticipate supply shortages and price increases within a few years."

Yet the WEO optimistically cites steadily growing oil production, which proposes that global supply will expand from today's 85 million barrels per day (mbd) to 106 mbd in 2030. That equals the addition of six times the current capacity of Saudi Arabia, the world's largest producer - an extremely unlikely scenario according to Andrews.

Currently, a modest margin of spare production capacity cushions the US against traumatic political or natural events. Until the recent economic downturn, demand has increased at a steady two percent per year. Numerous industry analysts, including some major oil company CEOs, are skeptical that world production can ever reach the 106 mbd suggested by the WEO report. Given current low prices and widespread financial uncertainty, oil companies will likely find it difficult to invest trillions of dollars in the necessary infrastructure to maintain current production in the face of depletion -- or to be able to afford the costs of a substantial production increase, Andrews says.

"Current trends in energy supply and consumption are patently unsustainable - environmentally, economically and socially - and they can and must be altered," said Nobuo Tanaka, head of the IEA. "One thing is certain. While market imbalances will feed volatility, the era of cheap oil is over."

ASPO-USA Executive Director Dave Bowden confirms that "the logical place to start is with energy efficiency - to cut our demand for oil by up to 50 percent by 2030 - which is an enormous challenge. That goal will become more and more critical as world oil production is set to plateau and decline within a few years."