On day two of the Oil & Money conference in London, Christophe de Margerie, Total’s chief executive, dropped something of a bombshell when he said he saw predictions that world oil output could rise to 100m barrels per day as the "optimistic" case.

Given that the International Energy Agency, and other official bodies are predicting a rise to 115m b/d or more, that is a strikingly low number.

As with the IEA’s own concerns about production, the issue is not so much the geology of oil reserves - the "below ground" factors, as they are known - although they play a part in Mr de Margerie’s story. More important, however, are the "above ground" factors: the lack of capacity in the industry to develop resources sufficiently quickly, and the geo-political problems that have hit production in countries as diverse as Nigeria, Venezuela, and Iraq.

What that means for prices, Mr de Margerie wouldn’t say. Predicting oil prices is a mug’s game, and Mr de Margerie has been around too long to get involved in it. As Albert Helmig, president of Grey House, a consultancy, put it: "The only thing I can guarantee is that the price will be different tomorrow. [There is] a lot of noise, little fact."

That said, however, it is clear that Mr de Margerie’s view of supply potential implies that prices will oscillate around a much higher central point than in the past.

Peak oil - the prospect that global oil production is close to or even past its peak - turned out to be the dominant theme of the first day of the 2007 Oil & Money conference in London. With prices close to $90 a barrel - even though they fell sharply on Tuesday - the threat of oil shortages seems much more pressing than it did a year ago.

Plenty of speakers showed versions of a chart showing investment into upstream projects - finding and producing oil - soaring in the past five years, while total output remains almost flat. There was a lot of talk about the battle against the brutal logic of decline rates - the rate at which production declines from mature fields - and how today’s oil finds were smaller, more challenging to produce and generally of lower quality than the finds of past decades.

Shokri Ghanem, Libya’s oil minister and chairman of the National Oil Company, observed that he did not expect world oil production to get much higher than 100m barrels a day, plus or minus 5 per cent. That is well up on today’s 85m b/d or so, but a long way short of the 116m b/d that the International Energy Agency expects for 2030.

Mr Ghanem was responding to a question from David Strahan, a writer and TV producer who is the author of "The Last Oil Shock", a well-written exposition of the peak oil case.

On the other side of the argument, representatives of the industry including Andrew Gould of Schlumberger, the world’s biggest oil services company, and Thomas O’Malley, chief executive of Petroplus, who is a US oilman now running Europe’s biggest independent refiner, argued that higher prices would ultimately draw out more supplies.

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George Monbiot, the environmental polemicist, can be erratic. But he is spot on in hailing the brilliance of Cormac McCarthy’s "The Road". If you can read that and still argue we shouldn’t worry about catastrophic climate change because it might not happen, you have a stronger stomach than I have.

With US crude now over $93 and heading for $100, economists have been scrambling for their models of how oil shocks affect the economy.

James D. Hamilton’s Econbrowser has a characteristically excellent round-up of the arguments, picked up by Brad DeLong. He cites a good article by Jerry Taylor and Peter VanDoren of the Cato Institute, arguing that

"the inflation, unemployment, and recession that supposedly follow oil price shocks are nowhere on the macroeconomic radar screen. If the economy goes into a tailspin, it will be in response to bad news in the housing market, not the oil market."

Similar arguments are made by Greg Mankiw at Harvard, a former chairman of George W. Bush’s Council of Economic Advisers, and Mark Perry, a professor at the University of Michigan. Both use a chart showing that the energy intensity of the US economy, as measured by British Thermal Units per dollar of GDP, is today less than half what it was in 1950, suggesting that the economy’s vulnerability to high oil prices has also dwindled.

Probably the last word on all this, though, came from the IMF back in April’s World Economic Outlook (chapter 1), which drew a contrast between a supply shock (bad for growth) and a demand shock (which could be good for growth). What we are going through now looks like a textbook example of that growth-friendly demand shock.

Prof Hamilton sounds a warning, though. As he points out, the share of spending on oil in US GDP fell from the early 1980s to the early 2000s in part because the price of oil was falling. As the price has risen, the inelasticity of demand has meant that oil’s share of total spending has been rising, and that could make the US and other oil-consuming countries more vulnerable to a price shock. He writes:

"We can avoid a recession only as long as consumers and firms remain as confident as Taylor and VanDoren above, and everything outside of housing continues to do well. Should we count on that as oil surges to $90 and beyond?  I am not so sure."

If global growth does hold up, one consequence would be that the demand for oil would stay strong. This year, the picture has broadly been of little change in oil demand in the OECD countries - with a small rise in the US cancelling out a small fall in Europe - but reasonably healthy growth in China and the oil-producing countries. For next year, both the IEA and Opec expect something similar. (Opec figures in the Monthly Oil Market Report, available as a PDF.)

That means we could see the price of oil being driven yet higher, and there must be some level at which the price will at last begin to bite on global growth. We can only hope we don’t get there.

After years of pressure, Warren Buffett has finally sold out of PetroChina, the listed company 88 per cent owned by China National Petroleum Corporation. He confirmed the news on Fox on Thursday, although traders had seen it coming.

Like Fidelity when it cut its stake, Mr Buffett says the decision has nothing to do with the disinvestment campaign by groups protesting at CNPC’s presence in Sudan. (A more positive view of that presence here.)

There is no reason to doubt him. Selling now could be a smart move irrespective of politics. PetroChina is an impressive company with good prospects, but the huge gains in Chinese shares - PetroChina will become one when it lists in Shanghai, probably next month - are beginning to look unsustainable.

And Mr Buffett has already made a terrific return on his investment.

The prospect of a Turkish attack on Iraq, which has contributed to the rise in oil above $90, has revived the debate over whether the US-led invasion of 2003 was a "war for oil".

Alan Greenspan’s remark in his memoirs that "the Iraq War is largely about oil" was seized on by some commentators. But the conspiracy theorising was overdone: he was hardly revealing the secret masterplan behind the invasion. Mr Greenspan was far from the heart of policy-making, although he did apparently make his views known. It looks more as though he is simply trying to make sense of a strategy that otherwise defies rational explanation. As Thomas Powers put it in the the New York Review of Books last month: "Not knowing why we went in allowed us to go in".

In the London Review of Books, Jim Holt attempts to make the argument that "It’s the oil", but his charges do not really stick. "The draft law that the US has written for the Iraqi congress would cede nearly all the oil to Western companies," he writes, which is true if you believe that those same companies control all the oil in Russia or Venezuela. The draft oil law allows for a range of different investment structures, and ultimate control over the resources always lies with the government. If Iraq needs foreign investment, which it desperately does, then it has to offer investors sufficiently attractive commercial terms.

It is not as if western companies have been rushing to take advantage of the invasion supposedly conducted for their benefit. Decisions on investing in Iraq are very difficult, and while much of the country is in flames, and the country’s politicians are so bitterly divided, none of the oil majors will be prepared to make significant commitments. Iraq’s oil production has hardly vindicated a decision to go to war for oil, either: it is running at about 2m barrels per day, down from 2.5m just before the invasion. Rupert Murdoch’s pre-war assertion that "the greatest thing to come out of this for the world economy, if you could put it that way, would be $20 a barrel for oil" looks more deluded than ever.

Mr Holt writes "In terms of realpolitik, the invasion of Iraq is not a fiasco; it is a resounding success." If only that were true.

US crude has gone roaring ahead to within a few cents of $88, as speculators get the bit between their teeth. You can watch Javier Blas talking about where oil goes next here.

The latest trigger has been identified as the threat of Turkish military action against Iraqi Kurdistan, which could disrupt Iraq’s oil exports through the northern pipeline from the Kirkuk field. But the flows through that pipeline are very small, averaging only about 100,000 b/d this year because of regular attacks, although they have been building up recently, leading - ironically - to talks about a more regular supply contract with Turkey.

The underlying reason for the price surge is that oil inventories are dropping, and look likely to be tight over the winter, as the International Energy Agency pointed out last week. Today’s soaring prices look like conclusive proof that the 500,000 barrel a day output increase agreed by Opec in September, which takes effect in two weeks’ time, definitely was too little, too late.

The next Opec meeting, the summit in Riyadh on November 17-18, looks a long, long, way away.

UPDATE: Oil has powered through $88, meaning that it has put on about $4 in two days. Opec has issued a statement saying it "does not favour oil prices at this level", but blaming everyone else for the surge in prices.

It says: "The rising oil prices which we are currently witnessing are, however, largely being driven by market speculators. Persistent refinery bottlenecks and seasonal maintenance work, ongoing geopolitical problems in the Middle East and fluctuations in the US dollar, also continue to play a role in pushing oil prices higher. Additional political tensions, seen during recent days, are also pressurizing oil prices upwards."

With that lot ranged against it, it is hardly surprising that Opec has lost control of the market.

Meanwhile, Goldman Sachs must be feeling pretty smug.

The peace prize for Al Gore and the IPCC was a powerful boost to Mr Gore’s credibility, at the end of a week in which it had taken a bit of a battering.

The UK government was taken to court by Stuart Dimmock, a parent of two children at a state school, in an attempt to stop Mr Gore’s film "An Inconvenient Truth" being shown in classrooms. The case has been widely seen as the Scopes monkey trial of climate change.

The verdict was rapturously received by Mr Gore’s opponents. But as the Deltoid blog points out (you need to scroll down a bit), much of the reporting of the case did not do justice to the balance of the decision.

The judgment is worth reading in full: it is a good statement of an intelligent layman’s attempt to make an honest assessment of the evidence. The nine counts on which Mr Justice Burton faults Mr Gore are "errors", he says (the inverted commas are the judge’s) in that the film departs from the consensus position of the IPCC. What Mr Burton did not challenge was that:

"(1) global average temperatures have been rising significantly over the past half century and are likely to continue to rise ("climate change");

(2) climate change is mainly attributable to man-made emissions of carbon dioxide, methane and nitrous oxide ("greenhouse gases");

(3) climate change will, if unchecked, have significant adverse effects on the world and its populations; and

(4) there are measures which individuals and governments can take which will help to reduce climate change or mitigate its effects."

He added: "These propositions, Mr Chamberlain [the government’s lawyer] submits (and I accept), are supported by a vast quantity of research published in peer-reviewed journals worldwide and by the great majority of the world’s climate scientists."

On the nine "errors", Mr Gore’s supporters have attempted to defend him, with mixed results. The claim in the film that "the citizens of these [low-lying] Pacific nations have all had to evacuate to New Zealand" really does not stand up. The evacuation of nations such as Tuvalu has not happened yet on any large scale, although there are plans for it.

On the polar bears drowning because they have to swim too far to find ice, however - a line that will play particularly strongly in the classroom - Mr Gore does seem to have a point.

All in all, the judge’s verdict seems the right one. "An Inconvenient Truth" can - and indeed should - be shown in schools, so long as teachers can fill in the gaps and correct the mistakes. The most important point of all comes up several times in the judgment: the important debate now is over the politics, and what we do about climate change, not over the science.

UPDATE: Bjorn Lomborg’s anti-Gore book is reviewed favourably in the FT, less so in Nature by Partha Dasgupta. As the Prof Dasgupta puts it: "He [Mr Lomborg] doesn’t question the science… he questions whether we should do much about it." The essence of Prof Dasgupta’s critique is this: "Even a small amount of uncertainty — when allied to only a moderate aversion to uncertainty — would imply that humanity should spend substantial amounts on insurance, even more than the 1– 2% of world output that has been advocated." That is Sir Nicholas Stern’s point, too: if there is a risk of catastrophic climate change, it makes sense to protect against that change, even if we think the risk may be small.

Brad DeLong, the Berkeley professor, star blogger and occasional FT contributor, has taken issue with a piece by my colleague Clive Crook on the US CAFE (Corporate Average Fuel Economy) standards.

Prof DeLong’s argument is that, while Clive may be right about the economics - you get an awful lot more fuel efficiency bang for your buck from taxes than you do from CAFE standards - he is being "naive" about the  realities of US politics.

He may have a point that unlike a higher fuel tax, a tighter CAFE standard could actually pass into law. Certainly it will be hard to rally opposition against a strategy that even the White House backs.

But on the other hand, the cost-effectiveness of a fuel tax is so much higher, at least if the figures from Mark Jakobsen of the University of California at San Diego are to be believed, that it is hard to give up on the politically unrealistic option. (Paper courtesy of the excellent blog Econbrowser, from two other economists, James D. Hamilton and Menzie Chinn, who add their own thoughts on the debate.)

Perhaps both sides should agree to rally around the powerfully-argued case for higher gasoline taxes made by Greg Mankiw, who is among other things a former chairman of the council of economic advisers for George W Bush.

Tony Hayward, BP’s new chief executive, has been given a rave review by the markets for his plan to reshape the company he inherited from Lord Browne. (Helped, it must be said, by a new record oil price.)

In the full transcript of his interview, he agrees that what he wants is fewer accountants and more engineers. For a company that certainly seems to have been over-dominated by accountants, that must sound like a good thing. But accountants have their uses, especially if you are trying to control costs. BP’s share price stands at a deep discount to ExxonMobil’s for a reason, and part of that reason is that Mr Hayward has yet to prove that he can deliver the improved financial performance he wants. He may be saying all the right things, but cash says more about a company than strategy statements ever can.