A short explanation: most oil industries have peaked in terms of production. That means they can no longer draw more oil from wells and other sources. It is also expensive to look for more sources.
Demand for oil is increasing faster than the rate of production. That is because China and India now require more oil than ever. For the past few years, the U.S., which has only around 5 percent of the world's population, consumed up to 25 percent of the world's resources. Now, more people outside the U.S. want to consume at the same level. Thus, we have a combination of increasing population and increasing consumption per person which are fueling demand. Any new finding in oil resources is negated by this increasing demand.
It also turns out that some alternative sources of energy require petrol (e.g., during the mining and manufacturing process, etc.), and that as more look for materials needed for alternative sources, demand also increases for them. In general, then, what is happening to oil is also happening to uranium, wind mills, food, and others: the demand is catching up with supply.
The basis of peak oil theory came from the 1950s, when a scientist predicted that oil production would peak during the 1970s and that oil would become more expensive in the long run. Here's one short article about it:
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