So just what is the oil price outlook now?

Oil price observers have been caught a little off-guard over the past week or so with the price of crude suddenly dipping to around $45 a barrel rather than maintaining $55 and pushing towards $60 a barrel. What has happened? Has the situation changed?

To answer the last question first: Not much. A slowdown in Chinese growth and a further up-tick in US interest rates are lowering demand estimates for next year, though not by a huge margin. The eurozone is showing weakness in the face of a falling US dollar, which keeps oil prices down but is bad for exports. And there is a lot of crude oil at sea for delivery soon.

Meanwhile, the voracious energy demand from China - which has helped boost world oil consumption by four million barrels per day over the past two years - is still in place. A country where the car population has doubled in the past five years can not suddenly reign in demand unless in an economic crisis, which it is not.

Experts still see a spike in prices to $70 a barrel as very possible. The list of possible supply-side disruptions is almost too long to be worth spelling out, and ranges from labour problems in Nigeria and Norway to terrorist attacks in the Middle East and elsewhere.

What is needed, argue the analysts, is a long enough-period of sustained high oil prices to convince the oil majors that they need to invest more in production. Then the actual supply of oil would begin to grow to meet the upturn in demand, and this would check prices and eventually send them into reverse.

The important point is that this sort of investment is not yet in sight. And when it does happen, and market prices will force it to happen, it will still take three to four years for new capacity to come on stream and dampen prices. Abu Dhabi is currently the only place in the world investing significantly in new capacity. Just how long will it take for the rest of the oil producers to catch up?

Well, a big energy shock might be needed to get things moving, say the pessimists. This will shake politicians and business policymakers out of their present languid complacency, and result in an emergency mentality.

It is not that world oil reserves are running out. It is that installed capacity is not sufficient to meet changing demand patterns.

Incidentally, this scenario for oil leaves the oil majors seriously undervalued by global stock markets, and any fall in oil stock prices alongside lower oil prices can be seen as a great buying opportunity. How many other industries can see rising demand and prices for their sector?