Speaking in a Senate committee hearing, the legendary Texas oilman T. Boone Pickens said that world crude oil production has topped out.

"I do believe you have peaked out at 85 million barrels a day globally," he told the Senate Energy and Natural Resources Committee Tuesday, according to Reuters.

He noted that the United States is consuming "21 million barrels of the 85 million and producing about 7 of the 21, so if I could take just a minute on this point, the demand is about 86.4 million barrels a day, and when the demand is greater than the supply, the price has to go up until it kills demand."

And when Mr. Pickens speaks about energy, the world listens. His ability to read markets has vaulted him into the ranks of the world's wealthiest people. His hedge fund, BP Capital, manages more than $4 billion in assets.

He's put his money where his mouth is. He is currently at work planning the world's largest wind farm, in West Texas.

By saying that oil has "peaked," Pickens means that right now, the world is producing the most oil it will ever produce. Soon, production will enter into a terminal decline, and prices will continue to go up.

The theory of peak oil was first developed in 1956 by Shell geoscientist M. King Hubbert. He predicted – correctly – that the United States would pass its own peak production between 1965 and 1970. Since then, US oil production has dropped steadily. Today, the United States imports about two-thirds of its oil, a phenomenon that Pickens described as "the greatest transfer of wealth in the history of mankind."

Most analysts agree the slide down the other side of the peak will not be smooth. In 2005, the Department of Energy commissioned a report to examine the impact of peak oil. The Hirsch Report (PDF) named for its lead author, energy adviser Robert Hirsch, puts the problem in stark terms:

The world has never faced a problem like this. Without massive mitigation more than a decade before the fact, the problem will be pervasive and will not be temporary. Previous energy transitions (wood to coal and coal to oil) were gradual and evolutionary; oil peaking will be abrupt and revolutionary.

The report recommended 10 to 20 years of "accelerated effort" to implement alternative fuels would be needed before the oil peak to avoid "major economic upheaval".

"Waiting until world oil production peaks before taking crash program action," says the report, "leaves the world with a significant liquid fuel deficit for more than two decades."

Not all energy analysts agree with Pickens's belief that peak oil has been reached. According to the Hirsch Repors, Royal Dutch Shell has stated that the peak will occur in 2025 or later, and the firm Cambridge Energy Research Associates says that it will occur after 2020. But most analysts cited in the report put the peak at around right now.

In response to Pickens's testimony, Republicans on the committee issued a press release that cited a June 17 Rasmussen Reports survey showing that 67 percent of Americans believe that drilling should be allowed off the coasts of California, Florida, and other states. Currently, the US bans offshore exploration for oil and gas deposits.

Incidentally, a day earlier, Rasmussen found that a minority of Americans oppose nationalizing America's oil industry.