First one must understand what Peak Oil is AND how it will affect oil supply and price.
World wide oil is believed to have peaked in 2008. There has been some ups and downs since then. US oil usage has dropped since 2008 for the first time since 1859. Mexican oil production has dropped. Britain has become a net oil importer when prior to 2000 Britain was a major net exporter. China has increased its demand for oil. Japan has looked at Natural Gas to provide electricity to replace the power lost do to the shutdown of its nuclear reactors after the earthquake.
Saudi Arabia gas increased production of oil more than what was believe it could do, but it is heavy sour oil NOT the light sweet oil Arabia was noted for before. Iraqi oil has returned to the world wide market to an extent not seen since the first Gulf War under Bush I.
Along with fracking in the US world wide oil supply has been stable. Most people who studied peak oil assumed a period of stable production before the decline in oil production would start. We are either still in that peak period or right before or after peak oil production.
People who studied peak oil also expected periods of price stability following the drop in oil production. This would be caused by a drop in demand dye to the high price of oil AND massive increase in marginal oil well.
The price increase will lead to a reduction in demand AND the introduction of oil from high cost oil fields as the price of oil exceeded the cost of bringing that oil into production. This combination of increase in price and more oil will lead to periods if supply exceeding demand and a drop in the price of oil. As the price of oil drops the oil put into production do to the high price of oil will be removed from production and demand for oil will increase. This will lead to a shortage of oil and an increase in the price of oil. This up and down pattern of price will continue for decades.
We are presently in one of those down periods and it looks like it will continue for one to two more years. The main reason appears to be how the fracking wells are financed.
Fracking wells require a huge investment to be drilled, but once drilled the actual production costs are quite low. When oil was $90 a barrel the cost to drill the well was high but if spread out over how many gallons one could get of the well; the well would be profitable at $ 90 a barrel.
The problem is the price of oil is now below the price to pay for drilling the well but above the cost to pump an already drilled well. These wells are pumping oil to minimize they loss but it is still a loss. At today's prices the oil wells can pay the cost to pump the oil from the already drilled well but not the cost of drilling the well in the first place.
Now the wells already drill have to sell their oil at a huge loss but given the choice of stopping production and losing all of their investments and selling the oil at a loss but getting some of their investment back, oil drillers prefer to get some of their investment back.
Fracking wells have a short lifespan; most of the oil is gone in three years and the wells close down in five years. You had a massive drop in oil prices in late 2009 to 2010 then a return to high prices in 2011 to 2012 then a slow but steady decline till today. The fracking boom peaked about 2012 to 2013 and we have seen a decline in drilling ever since.
Given these wells last five years; the wells already drilled will be producing oil till 2018. It is expected enough of these wells will go dry that by the end of 2017 we will see an oil shortage and an increase in the price of oil. The main reason is do to the present drop in the price of oil no one are drilling new wells for the cost of drilling new wells exceeds what is the expected profit from the well given the price of oil.
Such situations will become more and more normal as peak oil hits. Ups and downs in price as demand goes up and down due to the change in the price of oil. It took over 150 years to use up the first half of the world's supply of oil. It will take another 150 years to use the remaining half. The easiest oil to pump was pumped first. The remaining oil is much more expensive to produce. In fact the two big oil fracking oil fields have been known to exist since the 1930s. The ability to drill those fields has also been known since the 1930s. The reason those fields were not drilled prior to the 2000s was the cost to produced oil from those fields would exceed the price of oil. By 2008 the price of oil, in constant dollars, was the highest it had been since the US Civil War. At that price the fracking fields became profitable for the first time ever. Under Peak Oil the use of harder to get at and more expensive oil is what is expected.
Prices will jump up and down as demand for oil goes up and down. We are in a price down period but it is expected to end by the end of 2017. We will then see a price increase; massive drilling of new wells in more and more marginal (and expensive to produce) oil fields. The price will go up till a sizable population group can no longer afford to buy gasoline; they will stop buying oil and the price of oil will drop. That will be the oil business for the next 150 years unless another source of cheap energy is found that replaces oil.
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