ANYONE WHO has seen the film Mad Max will know energy shortages aren't something we should take lightly. Enough to elicit the breakdown of civil order, apparently! So should we be worried?

To answer that question, let me start by taking you back to the 1950s when M King Hubbert - a scientist who worked for the Shell Oil Company - noted a pattern in the exploitation and exhaustion of individual oil fields in the US.

The pattern was as follows. Petroleum engineers would find a new oil field, ramp up production, which would peak, then tail off steeply.

Hubbert concluded that, with some additional information about the number of oil fields to be found in the US and the size of their reserves, he could construct a production profile for the whole country. That's what he did and his predictions about when US oil production would peak proved remarkably accurate.

Now fast forward a decade. Hubbard's admirers, also known as proponents of peak oil theory, applied his model to global oil production. The main conclusion of peak oil theorists is that global oil reserves are finite and that the peak of global oil production is imminent.

After the peak, according to this theory, there will be a steep decline in production; crude oil prices will rise sharply, and there will be a shortfall of oil, which will wreak havoc on the global economy.

But this theory, like many Mel Gibson movies, is pretty implausible stuff - to an economist, at least. That's because it neglects to take into account the importance of technological progress and the adaptability of the market.

The oil industry has already been revolutionised by new technologies, such as 4-D seismic imaging and multi-directional drilling. These have made exploration and development much more efficient.

Such is the power of technology that proven reserves continue to increase year after year (see chart).

Oil is still a finite resource, of course, but the date of exhaustion is getting later and later.

These technological advances were unimaginable 40 years ago, when people started to apply Hubbert's model. And there will surely be future advances, which are similarly unimaginable today.

The bottom line is this: we are not going to run out of oil any time soon. And that gives us plenty of time to develop other, renewable energy sources in the meantime. Mad Max and his fellow officers of the Main Force Patrol may have to seek alternative employment.