Why ‘Peak Oil’ Will Never Lead To $500/bbl Crude Oil

* Although there’s more than 100 years’ supply of crude oil left in the ground, the resources that are “cheap and easy” to extract have for the most part already been discovered.
* By 2012 the decline of production output from conventional sources coupled with much higher extraction cost of unconventional sources will lead to peak cheap oil, a phenomenon that will put extreme upward pressure on oil prices.
* To a limited extent, a strong case exists for speculation on a moderate increase in petroleum prices.
* Those who anticipate extraordinarily high prices (upwards of $300/bbl) have failed to consider what George Soros calls reflexivity. The global economy simply cannot afford such prices, and the rules will be changed before they are reached.
* The future is likely to bring price controls, government intervention in the petroleum supply chain, and nationalization of oil resources.
* The oil industry will face many unanticipated challenges during this period, capping the price appreciation potential of both commodity and equity plays in the oil industry.
* Wise investors will focus on the initial price run-up expected to occur before large-scale government intervention ensues.

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