JACKSON, WY - Like I mention in Tuesday's Energy and Capital, since 1859, we have consumed 1.5 trillion barrels of oil. And with our forecasted rate of consumption, it will take only 20 years to consume another 1.5 trillion. In the past two years alone we've consumed over 60 billion barrels of oil-and that rate's about to take off.

The number of "giant" oil field discoveries has declined dramatically since the 1960s. The large reserves and production capability of these fields are essential to increase world oil production; the combined output of smaller oil fields serves at best to offset declines in the older giants. Unfortunately, since 1990, there have been few giants discovered in the world-a total of 35-and none of these has a production capability above one million barrels per day.

Before the 2006 "Jack" oil field discovery, which we all know has problems of its own, the last confirmed giant find occurred in 2003 off the Brazilian shore. But the oil found there contains mostly heavy (dirty) oil and is not expected to come on-line until 2011.

Although it's a sizable find, the 700 million-barrel Papa-Terra field lies in almost 4,000 feet of water (Jack is under 7,000 feet of water, and more than 20,000 feet under the sea floor.) Curiously, both the Papa-Terra and Jack discoveries caused Big Oil to jump for joy like a fifth-grader getting a snow day.

The size of the Jack field is still to be determined. But to put the size of Papa-Terra into context, at current global oil consumption rates, that amount of oil is consumed every 8.3 days! The world needs many more giants just to replace the consumed reserves. And we aren't coming close. In fact, we would need 85 Papa-Terras to make up for global consumption over the last two years.

The world's largest oil field, Ghawar in Saudi Arabia, was discovered in 1948 and currently produces approximately 4.5 million barrels per day. With an estimated 60-70 billion barrels in remaining reserves, it could continue producing for several decades, but nothing of its size has been discovered since. The importance of Ghawar and other older giant fields to global oil production can not be overstated.

Twenty years ago, 15 fields had the capacity to produce more than one million barrels per day. Today only four fields can produce that much:

• Ghawar (Saudi Arabia)
• Kirkuk (Iraq)
• Burgan (Kuwait)
• Cantarell (Mexico)

But I'm only getting started. You see, it gets worse-much worse . . .

The Last Domino Is About to Fall

There's an issue that has the world's finest geologists, physicists and investment bankers as nervous as an agoraphobic in Central Park.

These rational and conservative professionals are absolutely terrified by the fact that there soon won't be enough oil to keep the world's economies running. And the fear is spreading faster than the panic after an Orson Welles broadcast.

The reason for their terror starts with an indisputable fact . . .

Oil production follows a bell curve. But demand only increases.

As much as some may dream, oil is not renewable. It works like this:

Every year following the peak of oil production (believed to have happened already by highly respected researchers, geologists and investment bankers like Matthew Simmons), the world's output will go into steady decline. And the rate of decline is staggering . . . as much as 10% a year! And this isn't just a one-field observation. It is true for every oil-producing country and the world as a whole.

Assuming, for simplicity's sake, that the world reached its peak oil production back in 2005, that would mean that by 2025 there would be as much oil produced as there was in 1985. Fine, there was a lot of oil for the world in 1985. Only there's a slight hitch.

By 2025, the world's demand for oil is going to be 60% greater than it is today, while production capacity is thrown back to 1985 levels. This is due to the world's rapidly growing population and increasing industrialization. China's annual oil consumption growth rate of 7.5% and India's of 5.5% are both expected to take a quantum leap over the next decade.

It's easy to see there's trouble ahead. But rising demand is only a tiny part of our problem.