I think oil has itâs the best day behind, and I doubt if it will touch three digit number anytime unless war breaks out in Saudi.
One of the reason last time (2007/08) for oil to reach $140+ is a wide spread belief in the marketplaces that oil is a perishing commodity, and the world needs oil in larger quantity going forward. The price also assumes the new oil supply would come in the lower number than the demand, causing the demand-supply mismatch. The economics of the oil were so convincing that companies started drilling for oil in Arctic circles, which is tough terrain to explore and transport oil.
However, both these assumptions â limited oil supply and more oil demand in future- are more and less are invalidated.
In last 4/5 years, oil exploration using shale drilling has given people in the market confidence that oil will last much more than what people thought earlier (e.g. oil will never run out). I read in (not sure where) the US has shale supply that will last for 100âs of year. I am not an oil expert, and I do not know how long will it last, to be honest, but if the US- which consumes quarters of oil in the world- has enough shale gas for decades, then it does not augur well for oil consumption going ahead. Moreover, a shale drilling relies on technology. And as it happens with any other technology, the prices come down with time. In 2016, oil producer thoughts that oil needs to below $60 per barrel, for shale producer to survives (and hence Saudi allowed oil prices to fall below $30 to make shale producer bankrupt ). But fast technological development has ensured that US shale producers are pumping in more oil even when the oil prices are sub $50 and they are talking about being profitable at oil at $30. Now it does not matter (here for our discussion) much what price they will be profitable, but it the significance in term of availability. Now, oil producers or people pushing high oil prices cannot rationalise limited oil supply. Bear in mind that the US is the only (or maybe couple of more) that are actively extracting shale oil. So, there could be other places in the world, where the shale oil may be ample and waiting for exploration
The second thing is EV movement. The solar power is getting cheaper by the day. Even in India, new solar power contract is signed at record low prices (less than Rs 2.5/unit). The same thing is happening in Wind power, may not necessarily to the extent as happening to Solar power, but the prices are coming down rapidly, nevertheless. It is increasingly looking that the EV cars/buses/trucks will generate more sales, not 2/3 years, but in next five years. Increasing EV sales is apparently not good news for oil. Oil is likely to lose it prominence, at least from the transportation segment (and also power generation) soon. This does mean that it will become irrelevant immediately, but it means the world will require less and less oil going forward (once EV becomes mainstream).
In short, EV along with technologies improvements in solar technologies may have put a cap on oil prices in short and long term.