You cannot separate the argument from the objective reality the argument claims to describe.
Regarding the wild swings in the estimates of remaining oil, the largest discrepancy comes from the fact that oil in different places requires different amount of toil to extract it. At a certain point, this is too much to pay for all but a few applications (where energy density is needed most, or where the stored hydrocarbons can be used for other purposes).
Already the oil infrastructure is some of the most complicated and costly equipment in the world. We don't know where that economic break even point will be, but we do realize that one must exist. This, among other things, is driving futures. Each new type of oil requires a new type of capital investment. The involved parties are making gambles on future technology. Further influencing this is the fact that it's polluting enough to, potentially, influence much of the world away from it, thereby reducing the attractiveness of such bets.
One might gather that price will similarly effect heating costs and flight usage. Fuel economy is one of the foremost items on the minds of Americans now, according to Gallup (#2 in national issues, apparently).
Countries might increasingly wish to reduce their economic dependency on the oil market, as it becomes cheaper and cheaper to do so. There has been much support for an ethanol economy in the US; for example the bipartisan bill to introduce biofuel installations in gas stations.
Already Brazil has an ethanol economy, provoked by the 1973 oil crisis. Nations with similar agricultural capability and high oil dependency have the same incentives to guard
against future market downturns.
Finally, there's the global warming problem. I assume you don't believe CO2 has a major role. But from a pure economic standpoint, it is likely the governments and the populace will increasingly believe it has a major role and will probably do something about it, either collectively or individually. This will probably influence demand to drop, though it may not do so suddenly. Anticipating this, oil companies have a riskier bet to make in large capital investments in heavy oil extraction. Increasingly, such companies will try to diversify into the broader energy business, as many are already making efforts to do.
The oil price today, unlike twenty years ago, is determined behind closed doors in the trading rooms of giant financial institutions like Goldman Sachs, Morgan Stanley, JP Morgan Chase, Citigroup, Deutsche Bank or UBS. The key exchange in the game is the London ICE Futures Exchange (formerly the International Petroleum Exchange). ICE Futures is a wholly-owned subsidiary of the Atlanta Georgia International Commodities Exchange. ICE in Atlanta was founded in part by Goldman Sachs which also happens to run the world’s most widely used commodity price index, the GSCI, which is over-weighted to oil prices.
As I noted in my earlier article, (‘Perhaps 60% of today’s oil price is pure speculation’), ICE was focus of a recent congressional investigation. It was named both in the Senate's Permanent Subcommittee on Investigations' June 27, 2006, Staff Report and in the House Committee on Energy & Commerce's hearing in December 2007 which looked into unregulated trading in energy futures. Both studies concluded that energy prices' climb to $128 and perhaps beyond is driven by billions of dollars' worth of oil and natural gas futures contracts being placed on the ICE. Through a convenient regulation exception granted by the Bush Administration in January 2006, the ICE Futures trading of US energy futures is not regulated by the Commodities Futures Trading Commission, even though the ICE Futures US oil contracts are traded in ICE affiliates in the USA. And at Enron’s request, the CFTC exempted the Over-the-Counter oil futures trades in 2000.
So it is no surprise to see in a May 6 report from Reuters that Goldman Sachs announces oil could in fact be on the verge of another "super spike," possibly taking oil as high as $200 a barrel within the next six to 24 months.
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Yes, an economic breakeven point for oil exploitation exists. And it continuously moves higher, because oil-exploitation technology continuously improves. The current extraction price of $5/bbl (http://www.google.com/search?q=oil+cost+%22%245+per+barrel%2...) is not dangerously close to the $200/bbl, or $500/bbl, or $1,000/bbl that the market might accept -- is it? Speaking of what the market might accept, that, too, continuously moves higher, because technology continuously improves the efficiency of end-use. As gas-powered devices become more-efficient, the world's practical oil supply grows. More on how this process works can be found here:
Regarding the wild swings in the estimates of remaining oil, the largest discrepancy comes from the fact that oil in different places requires different amount of toil to extract it. At a certain point, this is too much to pay for all but a few applications (where energy density is needed most, or where the stored hydrocarbons can be used for other purposes).
Already the oil infrastructure is some of the most complicated and costly equipment in the world. We don't know where that economic break even point will be, but we do realize that one must exist. This, among other things, is driving futures. Each new type of oil requires a new type of capital investment. The involved parties are making gambles on future technology. Further influencing this is the fact that it's polluting enough to, potentially, influence much of the world away from it, thereby reducing the attractiveness of such bets.