(by Eric Reguly) – For the peak-oil crowd, that merry band of doomsters who believe global oil production is about to go into irreversible decline and plunge us into a new Stone Age, the timing couldn’t have been better. As the Association for the Study of Peak Oil and Gas was holding its conference in Cork, Ireland, earlier this week, oil prices conveniently set record prices. By midweek, they had gone as high as $82 (U.S.) a barrel.

The conference speakers were no doubt thrilled. If oil prices had been falling, their message would have been laughed out of court. As it were, Ronald Oxburgh, the British lord and geologist who is the former head of Shell U.K., one of the world’s biggest oil companies, looked like something of a prophet. He said oil prices could hit $150 as supplies fail to keep pace with soaring demand. Another speaker, CIBC World Markets chief economist Jeff Rubin, predicted prices of “around $100 a barrel by the end of next year.” Talisman Energy chief executive officer Jim Buckee talked about rapidly declining production from once-prolific and seemingly stalwart oil fields.

For years, decades even, the peakists have been considered the lunatic fringe by the mainstream oil and gas industry, with its visions of endless gushers. The industry had a simple but compelling argument: If you don’t believe us, listen to the economists.

The economists said - and still say - there is no shortage of oil; there is just a shortage of oil at low prices. If the price, say, doubles, the reserves will rise accordingly (though not necessarily on a 1-to-1 ratio). Higher prices means expensive reserves, like Alberta’s oil sands, can be commercially produced. Higher prices finance fatter exploration budgets and better oil extraction technology, and lure more talented geologists into the business.

They were right. But maybe the time has come to stop putting so much faith in the economists. As Toronto’s Pollitt & Co. said in an investment note this week: “Just because OPEC [the Organization of Petroleum Exporting Countries] raised output quotas doesn’t mean oil wells will respond.”

In one sense, the peak oil argument isn’t even worth arguing about. Of course oil production will - eventually - decline, plummet perhaps, for the simple reason the planet has run short of the rotting dinosaur carcasses needed to make oil. The better argument is that it scarcely matters whether oil production peaks this year or next if a huge gap develops between demand (rising alarmingly) and production (barely rising or rising not at all). In either case, the price goes up, as it has been, leading to potential economic upheaval or worse.

To Mr. Buckee’s point, some of the world’s biggest oil fields are limping into the geriatric ward. Take the North Sea, the reserve that turned the United Kingdom into an oil superpower in the 1980s, much to Margaret Thatcher’s delight. It was fun while it lasted. Production is falling off a cliff. The U.K.’s oil and gas output peaked in 1999 at 4.5 million barrels a day (a figure that combines oil and the equivalent output of natural gas). Today it’s about three million barrels, a figure expected to decline by 10 to 15 per cent a year. The U.K. is now a net importer of oil and gas.

Mexico’s Cantarell field, one of the world’s most prolific oil producers, is sweating too. Last year’s production, which averaged 1.78 million barrels a day, was 13 per cent lower than the previous year’s. A similar decline is expected this year. Meanwhile, demand is climbing relentlessly. China was self sufficient in oil until the mid-1990s or so. Now it’s the world’s second-biggest oil importer. Its consumption has climbed about 50 per cent since 2000 alone. China can’t take all the blame. Note that some of the world’s biggest oil producers are holding back oil to feed their own growing economies. Saudi Arabia’s consumption was up about 30 per cent between 2000 and 2005; Iran’s was up 21 per cent.

Since the 1960s, two barrels of oil have been consumed for every barrel found. Meanwhile, alternative energy is going pretty much nowhere. At a conference in Scotland earlier this month, Exxon Mobil and Royal Dutch Shell predicted that wind and solar power would supply only about 1 per cent of global energy demand by 2030. If they’re right, fossil fuels will remain by far the dominant energy source. But at what price? Forget peak oil. With such a yawning gap developing between consumption and production, higher and higher prices (barring a global economic collapse) seem certain. The predictions for oil at $100-plus a barrel are now no more far-fetched than oil at $50.