Americans don’t ride bikes much. Have you ever tried commuting to work on bicycle in L.A. or Oklahoma City? All the best to you—and please, wear a helmet and multiple bright flashing lights. Freeways rule in suburbia, and so does the 1½-hour commute. Without a car, you don’t get to work, and without work, you don’t eat. American society isn’t built for bikes, it is built for suvs.

Americans are used to cheap oil and cheap gasoline. Society is built around it. But with oil prices hovering around $100 a barrel, and predictions of $150 in the future, we might be about to pay the price.

Why has the price of oil tripled in five years? The world is not close to going dry of this finite, nonrenewable resource. Estimates suggest that we still have in excess of a trillion barrels of known oil reserves. And there may be hundreds of billions of barrels more to be discovered in sub-Saharan Africa, or in the northern Arctic ocean floor.

The problem isn’t that the world doesn’t have enough oil, the problem is whether new reserves can be discovered and brought online fast enough to both replace depleted oil fields and keep up with growing demand. Some analysts argue that the world is rapidly approaching the point where the pace of oil depletion overtakes the growth in new supplies. Some analysts argue that we are there already.

The world has hundreds of thousands of oil wells pumping out crude, to the tune of 85 million barrels per day. But each day, each existing well produces a little less oil—so new oil wells must constantly be drilled.

So many old wells exist, however, that replacing that production is becoming an incredibly difficult task—a task with which the world might soon be unable to keep up.

Fifty-four of the top 65 oil-producing countries have declining production rates, according to CommodityOnline. America itself is a huge oil-producing nation, but despite billions of dollars going into exploration and new technologies, not enough new oil has been found to keep up with production rates, which peaked in 1971. Indonesian production peaked in 1997, Australian in 2000, and Mexican in 2004.

A look at the world’s largest oil fields further illustrates why production rates are falling in so many countries. According to energy analyst Martin Payne, most of the world’s mammoth oil fields were discovered in the late 1960s or early 1970s, which means they have been pumping oil for more than 30 years. With the possible exception of Ghawar in Saudi Arabia, the world’s remaining top fields, including the North Sea, Alaska’s North Slope, the Gulf of Mexico and Siberia, are all losing production.

Each of these other fields, upon discovery, had thousands of wells drilled to exploit the oil. Now, when one well begins to go dry, it is easy to find a new one. When hundreds of thousands need to be replaced, however, it is a much bigger problem.

By the time new discoveries are made and put into production, the new production is barely able to replace the lost production from the hundreds of thousands of slowly drying old wells.

For example, America gets a lot of oil from Canada. The Canadian oil sands hold 188 billion barrels of oil but currently produce 1.1 million barrels per day. The fact that there is more than 400 years’ worth of oil at current production rates doesn’t matter. What matters to America is how much is pumped each day.

Estimates suggest that the oil sands may produce 3 million barrels per day by 2015 if costs don’t keep escalating and the manpower shortage can be overcome. So in seven years there may be an additional 1.9 million barrels of oil per day available for U.S. use.

That’s great, except for one thing: As oil production is ramping up in Canada, it is falling in other places.

America also gets a lot of oil from Mexico. In 2006, Mexico announced that, for the first time, its Cantarell field was going into decline. At the end of 2005, this giant field produced 2 million barrels per day. By the end of 2007, it was producing 1.3 to 1.5 million barrels per day. By the end of this year, it is estimated to be producing only 800,000 barrels per day. That is a loss of 1.2 million barrels per day in just two years.

Think about that. Over just the past two years, America has lost 1.2 million barrels per day from Mexico. But it will take seven years to bring 1.9 million more barrels per day from Canada.

Throw in the fact that Canada’s conventional non-oil sands production may also be peaking, and production within the United States continues to grind down, and it is not too hard to envision an oil-supply crunch.

“[I]t is very uncertain whether [new oil production] will be sufficient to compensate for the decline in output at existing fields and keep pace with the projected increase in demand,” warned the International Energy Agency (iea) in its “World Energy Outlook” for 2007. “An abrupt escalation of oil prices” could result, it said.

“Whoa. I want you to think about something,” says energy analyst Brian Hicks. “Oil prices are already near $100 a barrel. If the iea is warning us about ‘an abrupt escalation of oil prices,’ what exactly does that mean?”

It means that, astounding as it might sound today, it might not be long before $100 per barrel seems cheap.

Recent announcements from the West’s biggest oil companies seem to confirm that the world may be nearing its peak in oil production.

Last week, Exxon Mobil Corp and Chevron Corp, America’s two largest oil companies, announced blockbuster earnings. Both companies set all-time highs for full-year profits, with Exxon setting a new record for the highest yearly net income ($40 billion) ever for any company in the world.

With the record-setting earnings, you might have expected the share prices to soar—but they didn’t. Why? A big part of the reason, according to Robbert Van Batenburg, head of research at Louis Capital Markets in New York, is that “the story all over oil land is one of declining production that has been more than offset by record oil prices” (emphasis mine throughout).

In other words, the record earnings are being solely driven by record-high oil prices. The amount of oil the companies are producing is actually falling. Exxon Mobil, Chevron Corp, Royal Dutch Shell, and bp are all pumping more than they are replacing with new finds and consequently have falling oil reserves.

“Exxon and all of the integrated oil companies are growth-challenged,” confirms Brian Youngberg, an analyst at Edward Jones in Des Peres, Missouri.

Falling reserves is a huge negative for oil companies. That is why almost all the major Western companies have instituted share buybacks—to prop up share values and keep reserves on a per-share basis looking good.

In fact, Exxon, Chevron, bp, ConocoPhillips and Royal Dutch Shell are spending more money on stock buybacks than they are on finding new oil! Exxon, for example, is spending 50 percent more on stock buybacks than it is on exploration. According to Bloomberg, these energy behemoths are buying back so many shares that they may cease to exist as publicly traded companies in as little as 16 years.

Why would oil companies spend more money on share buybacks than on finding new oil to sell when oil is at record-high prices, and when they know that investors generally look negatively on falling company oil reserves?

The answer, according to Shell ceo Jeroen van der Veer, is that by 2015 the world will have reached peak “easy oil.”

In other words, the easy-to-find, easy-to-produce, easy-to-keep oil has already been high-graded. After 2015, Van der Veer says, the supplies of easy oil and gas will no longer keep up with demand.

Oil that is not “easy to keep”—meaning oil whose supplies are unstable due to geopolitical worries—is a growing problem for many oil companies and a major reason many Western-based oil majors are not sinking as much money into exploration.

Why spend money finding oil just to have it taken away from you?

The big reservoirs of oil in the politically stable Western-friendly world (the easy oil) have already been found. In much of the rest of the world, exploring for oil and then pumping it can be a very risky proposition. Whether it is terrorists and guerrillas ransoming oil workers and stealing oil in Nigeria, or resource nationalism in Russia and Venezuela (inviting international oil companies in to develop oil resources to later arbitrarily change contracts and confiscate oil production altogether), the world is becoming a less hospitable place for many companies.

Many Western companies are no longer able to explore for and develop oil and gas reserves in many places around the world—thus further constricting global oil production.

That bodes ill for consuming nations like the U.S.

According to the International Energy Agency, the world needs to spend $22 trillion to meet future energy demand—to find new sources of energy, build the infrastructure and get it to market. $22 trillion is an incredible amount of money. The U.S. is already close to being crippled under its current $9 trillion federal debt. Where is that money going to come from?

According to Shell’s chief, the world faces two scenarios.

Either the world works together, with political cooperation between governments and companies, or the world faces what he calls a “scramble”—a mad dash by nations to secure resources for themselves.

We don’t expect the cooperation scenario to work out.

Global oil production is struggling, and resource nationalism and geopolitical conditions continue to hamper oil production. Meanwhile, oil demand from China has increased a whopping 14.1 percent over last year, and demand in India has risen approximately 11 percent.

Barring a major recession, the perfect storm for oil prices may be brewing. If it is, conditions may be about to change radically in America as costs for everything from transportation to breakfast embark on a long upward price trajectory.

“We are facing an unprecedented problem,” says oil analyst Kenneth Deffeyes. “World oil production has stopped growing; declines in production are about to begin. For the first time since the Industrial Revolution, the geological supply of an essential resource will not meet demand” (Beyond Oil: The View From Hubbert’s Peak).

We might have to start thinking again about that commute by bike.