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We have the same level of world supply we did 7 years ago despite the change in price.

Only if you are ignoring some sources of petroleum like Canadian Oil Sands. We have reached back up above 87 MMBPD. We were several million BPD less in 2004.

http://www.eia.gov/cfapps/ipdbproject/iedindex3.cfm?tid=50&pid=53&aid=1&cid=ww,&syid=2004&eyid=2011&freq=M&unit=TBPD

All that production from new technology isn't enough to replace the traditional plays that are going offline.

Your opinion, not mine and many (not all) agree with me. Some of those old resources will go through many decades of enhanced production methods. The recoverable reserves from a typical field rises with the price as well.

And if there is no demand above a certain price level, then there is no increase in production.

That is a different concept than supply not meeting demand, as you first discussed.

Peak oil isn't a question of whether or not we have the technological capability to produce more. It's about whether we can increase our overall economic output enough

Of course some day we will use less petroleum and more of another source. The stone age didn't end becase we ran out of stones.

I would like to see your same chart ploted in tons of gold. It only proves that some commodities rise faster than the average market. Not really a surprise.

"The recoverable reserves from a typical field rises with the price as well."

I think I know where we're missing each other here. That doesn't represent a movement along the existing supply curve. That represents a leftward shift of the supply curve, itself. That typically results in a new equilibrium point of a higher price, but the same quantity still being supplied.

"I would like to see your same chart ploted in tons of gold. It only proves that some commodities rise faster than the average market. Not really a surprise.

I'll go a step further. You can plot the same chart in terms of virtually any fungible commodity over the past 12-15 years, and while the amplitude will change and the peaks may move by a few months left or right, the basic shape of the graph does not. What it means is that the only way we can continue to consume at current levels is by taking on increasing amounts of debt, because our actual economic output - indexed to anything real - has been in almost nonstop contraction over that period.