The secretary-general of the Organization of Petroleum-Exporting Countries (OPEC) said Monday that if producers fail to invest in developing new supplies, crude oil prices could rise as high as $200 a barrel. Abdalla El-Badri did not say when that could happen.

The last prediction for $200 oil that we can recall came in March 2008 when an analyst at Goldman Sachs predicted a “super spike” to that level when oil was trading around $100 a barrel on its way to an all-time high of more than $145. By the end of 2008, a barrel of West Texas Intermediate (WTI) sold for around $30.

The 2008 prediction was based on the premise that oil was getting scarcer and preceded the boom in horizontal drilling and hydraulic fracturing that did not begin to have an impact on oil markets until 2010 or so.

In the current market, oil is not scarce but plentiful. The increase in North American, primarily U.S., production has been the primary contributor to a daily surplus of supply that now reaches about 1.5 million barrels. Demand has fallen as new cars have much better mileage ratings and a global economic slowdown lowers demand for energy.

At their November meeting, OPEC ministers agreed to maintain production at around 30 million barrels a day, maintaining market share rather than cutting production to seek higher prices. El-Badri said Monday that the cartel is willing to meet with non-OPEC member nations to “tackle the glut,” according to a report from Bloomberg. He also said that a reduction in supply, not an increase in demand, is needed to bring the oil market back into balance.

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El-Badri appears to be rewinding a case that Venezuela and west African producers like Nigeria and Angola made in November to raise prices by reducing supply. But Saudi Arabian oil minister Ali al-Naimi said that it was not in OPEC’s interest to cut production, no matter if the price fell to $20 a barrel. He also said the world might never see $100 oil again.

Who’s right? The farther the price of crude falls and the longer its stays low, the more likely it is that crude prices will see a short-term spike into uncharted territory. The real question is whether a return to scarcity can lift prices $200 a barrel. El-Badri appears to believe it could happen.

Al-Naimi and Saudi Prince Alwaleed bin Talal believe that even $100 a barrel is unachievable again. The Saudi strategy seems to be to let every other producer fight it out for market share and when the dust settles for Saudi Arabia to be the last man standing.

With crude prices falling, not rising as they were in 2008, the case for $200 oil is not terribly strong over the near term of, say, two years or so. But if price remain low, more and more production will be shut-in and exploration for new sources will be virtually eliminated. Once prices rise, everything will start up again, but it will take a year or two before the new work produces results. It is during that gap that a spike to record highs is quite possible.

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