The tripling of oil prices since the summer of 2003 has unleashed forces that within the next two or three years will bring oil prices tumbling back down to below $50 a barrel. Looking even further ahead, prices could easily fall to $30 a barrel or even lower.
Cassidy goes into quite a lot of detail in his column as to why this should be the case, but basically it all boils down to supply and demand: right now, demand is high, while supply is constrained as a result of underinvestment by oil companies when oil prices were low. Within the next few years, however, supply will start rising: ExxonMobil (XOM) alone, writes Cassidy, has invested more than $60 billion into exploration and development over the past four years.
I'm quite sure that the peak-oil types will be entirely unconvinced by Cassidy's analysis, and in fact, Cassidy never quite comes out and says that oil production will actually rise significantly from its present 85 million barrels a day or so. He does, however, say that "an oil glut will emerge," which amounts to much the same thing.
I'm staying on the sidelines of this debate. I've never been convinced by the apocalyptic Malthusianism coloring most of the peak-oil theories, none of which has come true in the past. And the oil price right now does seem a little bubblicious. But at the same time I'm actually hopeful, for climate-change reasons, that things like tar sands in Venezuela remain untapped, and that supplies will remain constrained. High oil prices might serve as a brake on global economic growth in the short term, but they could also help save the planet in the long term.