Most people I know recognize that oil and gas reserves are finite. Most of my friends and family lived through or grew up in the 1970s during the oil shocks, and they always knew we were going to run out...some day. The leap that is intellectually most difficult for people to make isn't to recognition of scarcity, but to recognize the fact that there's no evidence that we can buy our way out of this one.
What most people, including those who believe we need to cut fossil fuel usage dramatically say is something like, "we need to devote a lot of money and energy to researching alternatives to oil and gas." And to a certain degree, of course, they are right. If we're going to blow our GDP on something, improving solar efficiency would be a lot more useful than buying more crap at ChinaMart. But that claim reflects an inability to grasp that alternative fuels may not, in fact probably will not, fix the problem.
We have an unrestrained faith in science and progress - even people who say they don't really believe that if we put our mind and wallets to something, we can fix it. And, after all, we've had a remarkable degree of success in that regard. But we tend to remember the success stories and let slide all the failures, giving us a skewed sense of our own power.
For example, over 30+ years we have devoted at least 28 billion dollars, and untold hours of brain power to research into fusion reactors, and, as Julian Darley points, we're always at least 30 years from creating useful fusion reactors. We have devoted over 100 billion dollars and the whole lives of many scientists to eradicating and eliminating the influenza virus from the earth, with the result that we're no closer than we were before. We have spent over 60 billion dollars world-wide researching and developing wind power, with the result that at this point, wind power produces less than 1% of the world's electricity. While wind generators rose in efficiency by 69% over that time, their efficiency is still many, many times less than burnable fossil fuels. The same could be said of hydrogen - the billions of dollars to create a "hydrogen economy" has left us about as far from having one as we were when we started. Ethanol has consumed even more billions, and it still takes more energy to turn corn into ethanol than the ethanol itself produces - and alcohol manufacture has been gradually refined over the whole of human history, so it isn't exactly a new industry.
The hardest idea to get your brain around on peak oil is that just putting money into research, just getting smart people to think hard isn't going to make magic happen. There are things we can't do - or perhaps we could do them, or could have done them, had we devoted our energies to them when we recognized the problem 30 years ago, but we probably can't do them now.
For example, we probably can't create a solar and wind-based electrical grid. Among other reasons, because doing so requires a major technological breakthrough. Wind is an intermittent power source, as is solar - they only work when the sun shines or the wind blows, and intermittent power sources can destabilize the grid, because we don't really have a good way to store electricity at a lot of seperate sites, as is required for wind farms - even Denmark, which uses more wind power than any country in the world, has capped its wind power at about 15%. Wind provides less than 1/10 of 1% of the total power usage in the US - we'd need 150 times the wind farms we have to get even that 15% up and running, and that would be our maximum for all intermittent sources.
I posted back a while ago a link to the DOE Hirsch report, which evaluates the threat of peak oil to the US. Its essential message is that if we devoted our money and our time and our national will towards resolving the energy crisis for 20 years on the same scale or higher than we worked on WWII, we could avoid ill effects. The problem is that we're much closer to the peak points for oil and natural gas than 20 years - by a decade or so, at least. And we're not putting our energy there.
To convert to nuclear energy would require 500 new nuclear plants, and nuclear plants are extremely time consuming to build (10-15 years), very expensive (costs borne by the tax base) and vulnerable to attack, accident and storage issues. At the moment, there are 0 nuclear power plants in production in the US. So even if we all wanted another several hundred (coming soon to your neighborhood!), we couldn't have them tomorrow. No matter how hard we research, we haven't found a way to turn gold (money) rapidly into nuclear power.
Yes, alternative energy is a good thing. But most alternative energies produce a few times the amount of energy they consume. Oil, gas and coal produce many, many, many times the energy they consume when you burn them. Nothing anyone has proposed offers the return of fossil fuels. And nothing we've done in research for three decades has changed that. Sure, solar efficiency has risen, and we can now make gas from algae...maybe. But scientific progress doesn't have time to save us. And as the economy starts to tank and energy costs eat up more of our reserves, we're going to have to decide. Do we fund scientists looking for the ultimate magic bullet, or do we put our money and time and resources into things like trains for public transport, and insulating our houses so that we can do without oil and gas to heat them.
Part of the problem is that for our whole lives we've been taught to believe in magical economic thinking - free markets will fix it. If we just put our money and energy into it, we can make anything we want happen. But free markets don't have brains, and they don't see things coming. By the time it is cheaper to use solar than buy oil, it will be too late - our economy will be in collapse and we won't be able to afford solar. And as wonderful as our accomplishments and brilliance has been, we keep running up against reality - sometimes we can't fix it, and we can't buy our way out of it. All we can do is live with it.