Peak oil theory states: that any finite resource, (including oil), will have a beginning, middle, and an end of production, and at some point it will reach a level of maximum output as seen in the graph to the left.
Oil production typically follows a bell shaped curve when charted on a graph, with the peak of production occurring when approximately half of the oil has been extracted. With some exceptions, this holds true for a single well, a whole field, an entire region, and presumably the world. The underlying reasons are many and beyond the scope of this primer, suffice to say that oil becomes more difficult and expensive to extract as a field ages past the mid-point of its life.
In the US for example, oil production grew steadily until 1970 and declined thereafter, regardless of market price or improved technologies.