It is claimed in a recent article  that the British P.M., Gordon Brown has misunderstood the cause of the present oil crisis, but if so he is hardly alone in this. There is much confusion and obfuscation surrounding the massive oil-price hike which yesterday hit $144 a barrel. Mr Brown takes an economist's view that the problem rests in barriers to supply that are "technical, financial and political". There is no doubt these are factors in the game. There are many technical challenges attendant to producing oil, especially as it becomes necessary to extricate the material from more difficult locations and to squeeze more out of existing fields. The fall in the value of the U.S. dollar has also impinged on the high price of oil and most immediately, demand for oil is such that production is struggling hard to meet it. Mr Brown and his Chancellor, Mr Darling, can urge North Sea producers and coax them with tax-incentives to sweeten the taste, but there is only so much that can be drawn from fields that peaked in 1999 at a daily near 3 million barrels but whose output is now down by 60% to 1.2 million bpd.
There are basic geological problems associated with oil production which cannot be sensibly surmounted. The prime one is that oil is buried at depth and under pressure and so when a well is first struck, the pressure of gas in the reservoir forces the oil out, but as the oil is extracted, the gas expands into the remaining volume so reducing its pressure and the oil is expelled more slowly. To maintain a decent flow-rate, the well may be artificially pressurised, e.g. with CO2, or sea-water pumped into it to displace the oil. Ultimately, the well is no longer viable to extract oil from and the company moves-on to another one. In addition, when oil companies explore for oil, they usually hit the largest fields first and exploit them, and hence as a particular region ages, it becomes necessary to start squeezing increasingly smaller oil deposits. Thus, the combination of these two "geological" factors means that decline of a field is inevitable as happened in the North Sea, irrespective of economic or political features.
So it is with all oil-fields, and tax-incentives will barely influence North Sea output or indeed that of the rest of the world. In the wider context, Mr Brown called the fact the OPEC controls 40% of the world's oil as a "scandal", when in fact the location of the oil is a bestowal from geology, and we can hardly blame the Arabs, Venezuelans or Indonesians for the oil under their lands. It was not they who put it there but some higher power. OPEC produces about 36 million bpd and the non-OPEC countries the remaining 50 million bpd or so. Things can change however, and according to the pressure/production argument above, they must. Accordingly, many experts now predict that OPEC output will peak at around 2010, and in effect that of the world.
The OPEC cartel probably has precious means for raising capacity overall. It may be able to push a little more out of existing wells, but this has to be measured against the fact that output from others is falling. Probably there is practically no overall excess capacity and most of the oil that will be produced (noting that oil will be produced for decades yet) will tend toward being of the heavier, high-sulphur varieties, for which additional refining capacity must be installed. Refining high-sulphur oil is expensive and so the product will not be cheap. The economic factor comes in through the increasing costs of exploration and extractive technology, in addition to the simple fact that an inability to produce more oil against rising demand will tend to keep the price up anyway.
But why worry? Apparently there is plenty of "new" oil to be had  which should cheer any politician who would rather not confront the only real solution to the oil-crisis and that is to use less of it. This is attacking the demand-supply gap from the other side. If we can't sensibly produce much more oil, then using less would achieve the same healthy supply-surplus. Easier said than done, I concede, but what about all this extra new oil?
Well, in a nutshell , it is claimed there are vast reserves of oil, as yet untapped. There are apparently 33 billion barrels off Brazil, and another 15 billion barrels of oil and gas in the Gulf of Mexico. There are other deep-water deposits,off West Africa and near Sleipner in the North Sea. There are also vast resrerves in Iraq and Iran. Then there is oil shale under much of the mid-U.S. and the Alberta tar-sands and Venezuelan ultra-heavy oil. Bakken shake too deserves a mention, under North Dakota, from which 4 billion barrels is thought a potential yield, to be compared with a total of 10 billion barrels in the Arctic National Wildlife refuge.
We could go on, and if coal-liquefaction is included there are estimates that we have 3.7 trillion barrels worth of hydrocarbons left. But sorry to spoil the party - so what? The mere amount of these hydrocarbons tell us nothing about the rate at which they can be extracted, and how much really can, by when or if at all. To access the deep water oil will require technology that is still under development, and all of the other sources will not be cheap and will require a great deal of engineering to exploit. We are on the verge of a gap that conventional production of oil is unable to bridge, and this is now lapping on the shores of peak oil, beyond which production will actually fall - for specified geological reasons.
Demand rises mostly from developing economies, e.g. China and India, and is maintained in any case by others, e.g the West. The "new" reserves will take years to develop and their oil will not offset the inevitable and imminent fall in traditional production. Welcome to the age of very expensive and increasingly scarce oil. Now, how are we going to manage with less of it, but in a positive way?
 "Gordon Brown doesn't get the oil crisis." By David Strahan. http://www.telegraph.co.uk/opinion/main.jhtml?xml=/opinion/2008/05/29/do2902.xml
 "The 'Peak Oil' Myth: New Oil Is Plentiful." By Jason Schwarz. http://seekingalpha.com/article/82236-the-peak-oil-myth-new-oil-is-plentiful