Colin Campbell, a leading peak oil theorist who is a retired geologist, has discovered the pricing mechanism.

After record prices and an economic downturn caused oil consumers to change their behavior, and oil demand in the developed world to fall, he's now a believer in peak demand for the developed world. We're already past it even.

Reuters:

"I have changed my point of view about future prices," said Campbell, who used to think the peak in conventional oil production, which he believes happened in 2005, would lead to a relentless price surge.

Instead, the record rally led to a peak in demand in the developed world.

"Peak oil drives prices up in the first place. It has its own mechanism. We're sort of at peak demand right now," Campbell told Reuters from his home in the village of Ballydehob, West Cork. "I think presently the price limit is about $100."

We frequently see peak oil believers who are highly accomplished scientists, but with little economics background. It shows how peak oil theory would make total sense if we existed in a world without economic forces, such as behavioral responses to rising or falling prices.

The funny thing is that Mr. Campbell is now probably too bearish on oil prices with his $100 near-term limit. With oil prices at $86 as it stands, it's pretty feasible they could break $100 if the world economy keeps growing at a decent clip. That's only a 16% move, which from the perspective of a market participant is nothing and definitely within the realm of possibilities.