For decades, the theory of peak oil—or the idea that the world either has or will soon exhaust its ability to produce more oil—was derided as a doomsday scenario too unbelievable to ever come to pass. But $147 oil and one commodity crash later, and suddenly peak oil doesn't sound so strange after all.

In fact, mounting scientific evidence suggests that peak oil will not only be a reality, but may soon be upon us, says Charles Maxwell, senior energy analyst for Weeden & Co.

With over 50 years' experience in the oil industry, Maxwell is a renowned expert in the energy markets; Institutional Investor has ranked him as the market's No. 1 oil analyst nine different years. In addition to his role as Weeden's senior energy analyst, Maxwell serves as director for Chesapeake Energy and American DG Energy.

Recently, HAI Associate Editor Lara Crigger sat down with Maxwell to get his perspective on peak oil, including why Athabasca's a better play than Haynesville, exactly how peak oil will change our quality of life and why we'll see oil back to $150 in just five years.

Crigger: Let's talk about the oil supply situation in the U.S. We've been trading in a $70-$80 range for months now—will we see a breakout to either side soon?

Maxwell: By and large, stockpiles are quite high. In many cases they're right at record levels. So we're struggling with an oversupply of gasoline, diesel, fuel oil and crude oil. And this situation in the U.S. is echoed in foreign areas, where, again, both crude oil and resulting products are on the high side. It's putting pressure on prices.

What's very interesting is that it's not putting more pressure on prices than what we're seeing. One might have thought that by this time, we might be down in the mid $60s or low $60s. I thought we might be. But that would be a traditional reaction to this high inventory. Obviously something else is happening here.

Crigger: What do you think that is?

Maxwell: I think there's this great wave of liquidity that has been created by the central banks around the system, and that liquidity tends to go somewhere. Among other things, it goes into gold, but we all understand that gold can only take so much. So oil becomes the primary place where excess liquidity goes, simply because of its ability to absorb so much. It's going into physical stockpiles and in paper barrels around the world.

So I think that prices now are both a mark of over-liquidity, if you will, and also of increasing thought that, for now, supply and demand in the world are roughly in balance, and inventories are modestly on the high side. But these conditions don't look like they're sustainable. That is, as India and China get back into gear, and America recovers, and so on, we're going to find that time is on the side of a tightening in the oil market. So as you can see that for 2013, 2014 and 2015, which I do (and many other people do too), then it becomes a question of, "Well, when do you want to buy?" People are beginning to buy with the future in mind, and that puts a premium on today's prices that is very difficult to analyze.

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