When the oil market is going up, people always make hyperbolic predictions about how high it can go. When oil was over $40 per barrel in the early 1980s, people said it was going to $100. When it was over $100 in 2008, people said $200, or $250. It takes a special sort of courage to predict soaring prices after a collapse. Step forward Matthew Simmons, founder of Simmons & Co, an investment bank specialising in energy. He is quoted on the Forbes website predicting a $500 barrel “somewhere in the next two to five years”.

If he is right, it would certainly solve the energy industry’s cash-flow problem, at the cost of finishing off whatever is left of the world economy by then.

On the other hand, as the excellent energy blogger Robert Rapier points out (scroll down), Mr Simmons has sometimes been wrong.

After the EIA storage data this week created some excitement that gasoline demand had stabilised,

On the supply side Conrad Gerber of PetroLogistics tells the WSJ that “the floor has been reached” as we are seeing unusually high levels of compliance from Opec members – now estimated by PetroLogistics  at 83% of the 4.2m cumulative cuts announced since September. In fact Gerber says this, combined with non-Opec countries such as Mexico and Russia seeing their output fall as their fields decline, means Opec could reach its desired price of $60 to $80 later this year.

But what about demand? Year-on-year comparisons are already affected by the fact that the run-up the June price peak was already starting to take effect. The Oil Drum’s Gail the Actuary puts together a nice chart from EIA data comparing the previous three years. Note that this includes non-gasoline petroleum products.

Total petroleum demand