There is quite the bun fight going on these days among oil price prognosticators, with much of it taking place on editorial pages and through the airwaves.

While many make fun of economists--saying that if all the economists in the world were strung end to end around the globe, they would fail to reach a conclusion-- the same might be true for those predicting the direction of oil prices.

The issue started boiling over following an in-depth piece written by Daniel Yergin, the head of Cambridge Energy Research Associates, on the issue of oil supply. Yergin's thesis is that there are sufficient supplies of oil because of increased energy efficiency and a shift toward conservation. He argues that even with the growing demand in China and India, the focus on innovation will go a long way to changing the way the world produces and consumes energy.

His view was challenged by Matt Simmons, of Simmons and Co., weighing in on the matter in the Financial Times. Simmons, firmly in the peak oil camp, believes that even with developments in technology, the supply of oil is finite.

He also argues that the methods being used to extend the existing supply that have brought access to deep waters or made oilsands production more efficient can't be seen as significant developments because they are decades old.

In other words, the oil producers, despite being able to access new resources in difficult geology, haven't come up with the big technological shift similar to what has happened on the natural gas side, and enabled companies to cheaply access reserves from shale formations.

But it goes beyond Simmons and Yergin. Jeff Rubin, former chief economist of CIBC World Markets and author of a book examining the impact of a dwindling oil supply, is on the record as saying it's only a matter of time before triple-digit oil prices are here to stay.

Rubin isn't necessarily of the peak oil camp, but he does adhere to the view that the cheap oil has been found and points to the rate of decline in oilfields around the world. According to his calculations, more than 20 million new barrels per day need to be found so that consumers can use as much oil in 2014 as they do today.

What's left after the cheap stuff is the marginal barrel--and because the marginal barrels are more expensive to extract, the price of oil is set to rise into the triple digits. Rubin takes things one step further, suggesting the consequence of more expensive oil will be a decline in global trade because the advantage of outsourcing manufacturing to where labour is cheaper will be negated by higher fuel costs.

If those aren't enough variables to consider, the International Energy Agency is about to weigh in with its annual World Energy Outlook next week. Judging from what has already been telegraphed, the IEA is calling for more drops in demand, the consequence of the economic downturn but also a result of better demand management and a focus on energy efficiency.

For the sake of comparison, last year's IEA study called for demand of 106 million barrels a day by 2030, down from 116 million barrels a day for 2030 that had been forecast in the 2007 report.

Should the IEA turn out to be right--although it has made a practice of "forecasting early and forecasting often" that has cost it a measure of credibility--it means the finite supply of oil lasts longer. And just to confuse things a wee bit more, the IEA--last year--warned of a supply crunch as result of the billions of dollars in energy-related investment being pulled off the table because of low prices and the lack of capital being available to finance new projects.

All this flows toward supporting another perspective being discussed--that of peak demand for oil, which could also have an impact on price and future rates of investment. This one is a bit tougher to accept, given the continued industrialization of China and India and the demand for energy inherent in that process. The world may well reach a point of peak demand, but it is likely decades away.

The point in all this is simply that the energy players are facing an even more complex matrix than ever before when it comes to determining what the global demand picture will look like. They do this in the absence of being able to define a key variable in this complex equation: the reserves of Saudi Arabia and other oil-producing countries in the Middle East.

The fact oil prices have risen back to $80 US per barrel, despite 2005 demand levels, is more than puzzling. Is it a reflection of how much reserves have dwindled in four years? The transformation of oil becoming an asset class in the vernacular of the investment world, or the fact that the barrels left in the ground are more expensive to extract and therefore prices need to be at a certain level for this to take place?

Much as the world would like a neat answer to all these questions, as the plethora of perspectives attests, it doesn't exist. And what this means is that pricing volatility, due to the uncertainty, is here to stay no matter whether one buys into the peak oil theory or the ample supply perspective that is linked to innovation and conservation.

dyedlin@theherald.canwest.com