Oil geology term: the point at which reservoirs can no longer yield increasing amounts of oil. Tends to happen when they are about half-empty. The point at which maximum production is reached. Afterward, no matter how many wells are drilled, production begins to decline.
"US oil production reached an all-time high in Dec. 1970 when output from the lower 48 states and the Gulf of Mexico briefly topped 10 million barrels per day. Then... output peaked and began a steady and relentless decline... even after Alaskan oil finally came onstream." [Simmons, Twilight in the Desert, Wiley, 2005]
World output peaked at 82 mb/d (million barrels/day) in the summer of 2006. Since then, it has begun its irreversible decline.
Witness the dramatic rise in the price of "light, sweet" crude oil. It surpassed $80/bbl in Sept., 2007, and $100 in Feb., 2008. Many reasons have been cited, including unrest in Nigeria, pipeline sabotage in Mexico, hurricanes in the Gulf of Mexico, and Turkish/Kurdish skirmishes in Iraq. But the dominant reality is that most oil-producing countries are pumping at maximum capacity and are unable to boost production to meet rising international demand.
The eventual and painful shift to different sources of energy -- the start of the post-oil age -- does not begin when the last drop of oil is sucked from under the Arabian desert. It begins when producers are unable to continue increasing their output to meet rising demand. Crunch time comes long before the last drop.
"Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary."
-- Feb., 2005 report of US Dept of Energy's Nat'l Energy Tech Lab