In a matter of a few short few months as oil prices skyrocketed to peak at $150 a barrel, there was no shortage of expert analysis suggesting the world was on the cusp of the end of the oil age.
What was envisaged by many pundits was the world was to suffer from dwindling supplies and continue to be buffeted by price increases of the order of $200 to $250 barrel and beyond. At that time when I last revisited the ‘peak oil Theory” in my post in August this year I concluded there wasn’t enough empirical data available to reach any reliable conclusions, but if anything prices were likely to reduce to somewhere below the $100 per barrel in the shorter term although the overall peak oil theory remained creditable enough longer term.
But since then oil has tumbled to currently test $60 barrel, and may even fall as low as $50. Recessionary fears have had an effect but are insufficient in themselves to justify a 67% decline. Rather it has been the speculative investment in commodities, including oil,(seen as a hedge against inflation and a weak dollar) that caused both its rapid increase and subsequent collapse as commodities sunk. Hence the collapse of commodities precipitated an unwinding of these positions which accounted for most of the initial recent rapid price decrease just as its reverse impacted similarly on oils previous upward price spiral.
Oil is also not subject to the usual price mechanism, e.g. as prices rise supply will increase to meet the demand and as prices fall supply will decrease. That’s because many of the larger producer countries economies are so dependant upon oil incomes that they will continue to pump oil regardless of falling prices and may even accelerate production( with the exception of OPEC) during periods of declining prices to make up for the shortfall in income by increasing volume. Hence it can fall more than the fundmentals would suggest.
So it would seem we are now somewhere near its long term price (which is well below the long term rate of inflation) but it will decline in the short term as recessionary impacts further curtail demand
However when there is a sufficiently large enough rise in its price previously uneconomic fields become feasible and this is true for much of the heavy shale mining which is now prevalent in Canada.
Cart who has a particular inertest in Canada , having resided there recently, sent me this article - Ironically, As Price Per Barrel Drops, American Oil Supply From Canada Imperiled
which further highlights the intricate web of supply that make price predictions under the 'peak oil' theory problematic.