Oil is a limited resource. Although natural processes do create new oil, it takes millions of years. On human timescales, no new oil will be formed. So we have only the finite amount that is in the ground now. As we use it up, naturally the oil companies start with the easiest and cheapest oil to get. That means over time it gets harder and harder to extract a barrel. The result of this is that there will come a time when the rate of oil extraction begins to decline, even though there is still plenty of oil left. That is peak oil.