Reply #11: He also said oil won't last forever, that oil is a finite resource, subject

[Thunderstruck]

to the laws of supply and demand. And when supply i, or expected to be constrained against demand, prices will go up. And speculation on future supplies will happen.

to the laws of supply and demand. And when supply expected to be constrained against demand, prices will go up. And speculation on future supplies will happen.

I was laughed at the other day for sourcing the IMF to explain the situation. Here's their report, for anyone who cares:

http://www.imf.org/external/pubs/ft/weo/2011/01/pdf/text.pdf (See Chapter 3)

The persistent increase in oil prices over the past decade suggests that global oil markets have entered a period of increased scarcity. Given the expected rapid growth in oil demand in emerging market economies and a downshift in the trend growth of oil supply, a return to abundance is unlikely in the near term. - IMF, "World Economic Outlook April 2011"

And...

More from the linked report: Oil is considered scarce when its supply falls short of a specified level of demand. If supply cannot meet demand at the prevailing price, prices must rise to encourage more supply and to ration demand. In this sense, oil scarcity is reflected in the market price.The price should reflect the opportunity cost of bringing an additional barrel of oil to market. It compensates the reserve owner for the cost of extraction and for the loss of one barrel of reserves that could have been sold in the future. In general, a high price level relative to the prices of other goods and services indicates scarcity, a low price indicates abundance, and changes in price over long periods signal changes in scarcity. Well-known models of commodity extraction also imply that the market price generally serves as a reliable guide to the opportunity cost, including the cost relative to expected future scarcity.