Oil is way higher than $120/barrel now, and everyone thinks it's over $100 to stay, and perhaps headed for $200. Wowie-zowie! Peak oil, huh?
It's more complicated than that. There are vast oil shale reserves all over the world, as well as "subprime" undersea wells, and we're discovering new oil all the time. Furthermore, people on the cutting edge of petroleum are questioning whether it's a fossil fuel or not. It may be the byproduct of microbes that live miles below the earth's crust, in the extreme heat of the earth's mantle. But that's incidental to my point. My point is that there is still a lot of oil in the world, and it can be extracted and refined for well under $100/barrel.
The fundamental supply and demand, backing out speculation, puts the price of oil in the double digits, in fact below $80, according to most economists.
By now you probably suppose that I'm trying to say that oil should be less than $80. Far from it. Speculation is a valid economic activity, and it is based on (more or less) reasonable expectations of the future, or at least, hedging against a possibility that may have only a 10-20% chance of occurring, but will be the most important thing that could happen if it does. For instance, world war probably won't break out over oil, but if it does, you will want to be the one who paid just $1,250,000 for ten thousand barrels of oil ($125/barrel), because everyone else will be paying $1000/barrel after the OPEC flow ceases and the rationing starts.
Do I think oil will come back below $100? Probably, but I'm not so convinced that I would put money on it, because fundamentals based on sound speculation have a way of catching up with speculation. At some point we may be looking at fundamentals that dictate $120, while speculation raises the actual price to $200. In that case, the people who bought at $120 can sell for > 60% profit.
Silver is another resource where the price seems to have gotten ahead of the fundamentals, if you think of it as merely an inflation hedge, but I think the fundamental case for silver is even better than oil. People underestimate the industrial usefulness of silver, and nobody's trying to find alternatives for it. (We already have alternatives: gold is the high-end alternative, and copper is the low-end alternative.) Silver is much more useful than copper, and much rarer. And we have been depleting our mined and refined supply of silver much more rapidly than that of gold. That's why I own call options for companies like Coeur d'Alene Mines (CDE), and I'm ignoring oil, except for companies like Bolt (BOLT), which profits from the increasing price folks are willing to pay to find undersea oil wells.
So I expect silver to rise, outpacing inflation for the next few years, and silver miners to outpace silver itself, if they refrain from hedging on the way up and can keep their dilutive tendencies under control. Oil could see a serious pullback, meanwhile, especially if someone has a serious breakthrough on an affordable, effective alternative energy, which we don't yet have. (Don't kid yourselves, solar flacks.)