Graphical Oil Paths

I've been thinking about a graphical depiction of the future of oil prices and production. Below is the updated but entirely American version of Figure 3 in Amory Lovins' Winning the Oil Endgame (which depicts world consumption). The data comes from the EIA historical website (production and oil prices to the refiner, adjusted to 2005 dollars with the BLS inflation calculator). (click on graph for a larger version)













Here's the narrative: Starting in 1973, production (demand) rose rapidly until the Arab embargo of 1979. Then, prices rose rapidly and production (demand) fell. By 1990, production (demand) had risen again to about the same level as it had been in the mid-70s, but real prices were lower. Prices remained steady even as production (yes, also demand) had risen far above what they had been in 1979. Lately, as everyone is well aware, prices have again risen, even as production (demand) skyrocketed throughout the 90's and 00's. But in the last few months, demand has finally fallen off. (The chart uses annual values until we get to January 2005, at which point it switches to monthly values through July. Both price and quantity values were not available for August, neither was available for September. I guessed that prices would be up and quantity down for September because ..., well, because it was obvious.).

So, now what? There are, as I see it, three options:

• The Peak Oil Pessimist path: Prices will continue to increase, but supply will now constrain demand and will gradually fall.
• The pseudo-Simon Optimist: We will continue to find more oil and prices will come down. I call it "pseudo" because I don't read Simon as having said we will always find more. He said that we will never run out, and that's a different statement.
  
• The Substitution Optimist: We will find substitutes and alternatives, driving both the price and the quantity consumed (supplied) down.

These are depicted here (click on graph for a larger version):















I'm curious about the pseudo-Simon path: will these charts of price vs. production always climb to the right, with periodic epicycles?

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