Two of the world's most successful investors say oil will be in short supply in the coming months.

   

I don't think it will get that high, but you can certainly see how, if geo-political troubles accelerate in the Middle East, the spot price of oil could easily get to $150.

Oil demand has been growing above trend the past 4 years. Trend has been 2% while its been 4% this decade. That incremental demand accounts for an extra 1.5-2 million barrels of oil per day. Oil has gone from $20 to $70. Iran produces 4 million b/d. If Iran were to cut off its supply (it won't since it brings in $150 million each day, but let's pretend), you're taking off double the amount of oil that has been swallowed up in incremental demand and has contributed to the oil price tripling.

Of course, that would lead to demand destruction and the price would collapse back down again. Also, its highly unlikely that oil would get that high in the futures markets.

   

Supply vs Demand. Demand is increasing faster than supply is. As a result prices go up. And as oil gets more expensive, Canada will have the largest recoverable oil reserve in the world, the tar sands. Reserves are the known quantity of a resource that is ecconomically profitable to recover. As prices increase, a greater amount of that resource can be extracted, as does discovering new sources. This is why we will never run out of oil, it will just become too expensive to extract, but before that it will become too expensive to use to fuel our cars.