Peak Oil Theory

There has been a lot of discussion on the blog concerning oil prices and the next direction they will take. Peak oil theory posits that a scare supply leads to a permanently higher price level and there are many supporters of this theory. However there is plenty empirical evidence to combat this theory like technological advances mentioned in the post above, but that does not mean the theory should be discredited. Personally the theory seems rational and fits basic supply/demand models, but the theory is very simple in that it doesn't take into account exogenous variables that could potentially create problems with the model. I think an important thing to remember is that many of the predictions and opinions we hear on oil are based on a multitude of models none of which are completely comprehensive.