The price of a barrel of oil has declined precipitously in the second half of 2014, so that from June 30,2014 when the price of a barrel of oil was at $105.37, it has declined to a price of $53.14 as of December 30, 2014, an astonishing drop of approximately 50% in the span of just six months. This would perhaps imply that the shortages and difficulty in finding inexpensive crude oil are a thing of the past, and therefore we are now entering into a stage of worldwide crude oil oversupply because of technological innovations and the like. That conclusion, however, is flawed for various reasons.
Let us look first at the price history of crude oil, over the last four decades, to which, in December of 1973 west Texas Intermediate crude oil was selling for $4.30/barrel, yet just one month later in January of 1974, the price had jumped to over $10.10/barrel, and the price of oil since then has never been in single digits again, to wit the first modern peak oil price was $39.50/barrel in 1980, onlyfor oil to slide all the way back down to $11.60/barrel in 1986. Oil prices then ran up to $35.90/barrel in 1990, only to slide back down to $14.50/barrel at yearend 1993. After 1993, oil prices, began to move up in general to which by June of 2004, the price exceeded $40/barrel for the first time. The price of oil after hitting $40/barrel consistently moved up and up, before breaking through the $100/barrel price for the first time in 2008, before because of the financial crisis of 2008, it plunged to $39.10/barrel in February of 2009, but by March of 2011, it was back over $100/barrel, and consistently ranged in the $90-$100 ballpark over the next three years. The above demonstrates that crude oil pricing is volatile depending upon a multitude of conditions, such as the economy, war, embargoes, and the like, nevertheless the price of crude oil went from $4.30/barrel (inflation adjusted is $20/barrel) to $100/barrel in about 40 years.
Clearly, the price of oil and the ramifications of its increase, has been felt in America and worldwide over the last four decades, in which until the most recent plunge in pricing, oil has increased on an inflation adjusted basis 5X over its price 40 years ago. Even if crude oil was to maintain its current price of around $55/barrel the inflation-adjusted increase would still be 2.75X over its price 40 years ago, so the pundits that proclaim that there isn't such a thing as peak oil, that mankind in his ingenuity has been able to come up with new and innovative ways to extract oil from the ground at unprecedented rates and thereby the shortages of old, are gone forever, or at a minimum for the near-term foreseeable future are not truly accurate in their assessments.
The fact of the matter is that crude oil pricing is volatile, as demonstrated above, and is much more volatile than we would prefer it to be. Additionally, the strength of the dollar, which has been consistently in an upward trend since April of 2008, also makes a significant difference in the price of crude oil, since oil is priced in American dollars. The bottom line is that if peak oil was not true, than oil would be falling back down to the pricing of pre 1974, but this simply isn't going to happen, because the cost to extract crude oil has risen considerably since the halcyon days of the 1960s and early 1970s. This clearly states that the easy oil has already been discovered and exploited, and while we can consider ourselves fortunate that there is so much additional oil still available to be extracted, the extraction process costs more in both labor as well as materials, which necessitates a higher price for oil, and this will continue to be the case, going forward.