It's started happening already - the oil price spikes of 2007 were a harbinger of things to come, and they led to a widespread consumer shift from SUVs to hybrid, and the development of things like Tesla Motors.
Also, if Saudi Arabia or wherever "run out of oil" I'd expect political instability to result there, but also, it not to matter as much. Before running out there, I'd expect it to matter more.
I look forward to some facets of our crazy lifestyles changing (less exurbs and McMansions) but it'll definitely crimp GDP somewhat, more or less depending on the derivative.
The OP asked for the effects of peak oil specifically though, not for actual oil prices. In the short term, oil supply is ruled by geopolitical concerns. We bomb Iraq, the price goes up. Putin decides to flood the market with cheap oil, the price goes down. Chavez starts saber-rattling, the price goes up. World enters recession, the price goes down.
The Hubbert curve is what's left when you subtract out all the random political noise. And that slopes gradually down. So if we're limiting ourselves to the effects of Peak Oil only, the trendline for price is going to move slowly, even if the price in any given month gyrates wildly.
Really? No one -- not you, nostredemons, nor anyone else -- can make such a claim with authority. The simple fact is, we don't know. No one knows. The peak oil opinion is that reserves have been vastly overstated and technology has made extraction termendously efficient at the detriment of a gradual decline in supply. So they're arguing the opposite.
We also don't know how much of the 84 million barrels a day that we're currently consuming is price elastic. So the question isn't a simplistic, "Will we switch if the price gets high?," but the much more interesting, "if it starts to rapidly decline, will we have enough elasticity in demand to withstand the decades it would take to replace that energy with alternatives?"
But I don't think the oil price spikes of 2007 were a harbinger of this. The supply of oil is relatively stable compared to demand.
Demand is affected by all kinds of things. Since prices of many other commodities spiked at the same time, the dollar had declined, gold had tripled, its far more likely that the Fed's cheap money overheated demand. And China's building boom probably had a lot to do with it too.
I think you're making the error of equating "energy" with "oil". In an economy that relies on moving people and stuff around, new cheaper ways of supplying the energy will always be found - it's in our nature.
Example: New York state has huge natural gas reserves. If you converted all the buses in New York to run on CNG, the state would still be be a net-exporter of natural gas.
Petroleum is spread throughout our lives. Agriculture is driven by it (fertilizers). We use it to make plastics.
Moving our economy from oil looks to be a major undertaking.
Read this book by a petroleum geologist for a sobering view: http://www.amazon.com/Beyond-Oil-View-Hubberts-Peak/dp/produ.... He is most convincing about why we won't find more oil, less so about economics (because he's not an economist, presumably).
72% of domestic oil consumption is for transportation [1]. If we eliminate that use, then the amount of oil needed to power all other usages is less than 1/3 our total oil consumption. You can get pretty far down the Hubbert curve before total production is less than 1/3 what it is today.
I'm surprised at the confidence in this thread, but humans have a terrible capacity for forseeing change. Taleb's Black Swan is about this. He has a great example: every day of a turkey's life is a reinforcement that the farmer feeds and cares for it, until the last day. For the turkey, it's a black swan; for the farmer, it's not. Whatever you think of the future of the price of oil, above all don't be too confident. Don't be a turkey.
The basic concept is a system of differential equations called "World3" that allows for the analysis and qualitative understanding of the multitude of interactions between the various bio-geo-chemo-physical systems that couple us to our planet.
While it doesn't strive to make actual concrete predictions, it does enumerate a bunch of different possible trajectories that are all consistent with the most current scientific models, and with policy choices we as a species might make over the next 50 years.
And the conclusion is pretty much that we are doomed. Sadly. It seems likely (especially with the failure of Copenhagen) that we just are not politically capable of the level of co-ordinated activity needed to prevent a massive 'overshoot' beyond sustainable human population and consumption levels.
Carl Sagan talked about the potential for the human race to snuff itself out. He might have been thinking about the Cold War at the time, but it seems the real war is the one we have we are waging on the very systems that support our continued existence on earth.
I personally believe they have too much of a horse in the race to accept that oil is not limitless, but to this point they have been proven right that new sources of oil will crop up.
In asking a question like this, I think it's worth considering the possibility that "peak oil" is little more than a myth, even if us tech people don't buy into the concept.
My sister is an exploration geologist for one of the major oil companies. Within the industry, peak oil is very widely recognized, and the general consensus is that it will happen within the next 10 years, and probably already happened a few years ago.
The myth is that we're all going to be doomed because of peak oil, they'll be widespread societal chaos, and it'll lead to the death of Big Oil. At least over the near term (~next 40 years or so), peak oil generally means more profits for the oil companies, as they control an increasingly scarce resource. Over the long term, they are potentially screwed, but good luck finding a CEO who cares what will happen in 50 years, so their efforts to finding a solution have been rather halfhearted...
Assuming you mean that as some sort of slam against CEOs: Project that slam backwards. If a CEO in 1950 had "cared" about 2000, would that have improved his decisions? 50 years really is too far away to plan, and the gulf between 2000 and 2050 will probably make 1950 to 2000 look smallish.
I'm not a huge fan of "next quarter, the world ends" thinking, but expecting 50 Year Plans is not the solution. (Even 5 Year Plans have a certain... reputation.)
This occasionally means that humans make rather regrettable choices that could totally have been avoided in hindsight, but I don't see a way to fix that without them making other regrettable choices that could only be seen in hindsight. I think it's fairly obvious that there will be a problem with the oil industry in 50 years; however, I have no idea what a possible solution to that problem will be, and I doubt anyone could until a few years have gone by.
It has crossed my mind that the "Great Filter" is simply that between here and "sustainability" is not an impossible path to follow in the mathematical probability-0 sense, but that there are so many local optima that end in global disaster that nobody ever makes it through.
The U.S. has made a habit of equating it's political and economic stability with it's ability to continue pulling in oil at stable prices which, in my opinion, is the reason for many of it's recent wars.
There's is no shortage of oil world wide, but regardless of quantity the price shifts for consumer countries will continue to impact their economy and continue to cause these wars.
It would be nice to see alternative technologies become cheap enough that the US dependency goes away, but then you have another question to ask yourself, what will the countries who currently capitalize on Oil profits do? What will the geopolitical landscape look like then?
From which point, supposedly, our oil reserves will continuously decline and demand will continuously and progressively exceed supply.
The hype generated from this is along the lines of the world tanking, political instability, and so on.
In the next 10 - 50 years, we may see the oil companies start to go down . . . but damned if they're taking us with them !!
I don't believe this is true. Do you have any citations to support it?