The future of the global economy will, in my opinion, turn more on this question than any other:
Will demand destruction hit India and China, or will their oil consumption continue to rise?
The answer here will determine much of how peak oil plays out. It isn't a "tipping point" where we'll suddenly enter a post-peak world, or an energy-scarcity world. We're already there. Rather, this is a "bifurcation point"--a potential radical divergence in the impact that peak oil has on the global system.
If the Indian and Chinese economies are fragile--as many think--and can't continue to grow with $150 oil, then they will cut back on demand, and oil prices may stabilize as global oil demand stays in line with gradually declining global net oil exports. This will allow for a more gradual response to energy scarcity, a re-tooling toward renewable sources, new settlement patterns, etc. If, however, the Indian and Chinese economies are much more resilient than many think--as I think is the case--then Indian and Chinese oil demand will continue to rise rapidly, more than making up for any demand destruction in the more mature western economies. The result will be continued rapid price oil price increases, additional economic stress in the West, and greater turmoil in general. I think the answer to the question will largely turn on the vibrancy of internal consumer demand from the growing middle class in both states. It's simply too early to predict with confidence, but here's an indicator that suggests Indian and Chinese oil demand will continue growing:
China June Auto Sales up 15% Year-on-Year
That's 836,000 new cars in China in June alone. And, significantly, in China the majority of these new cars are the first car for an individual consumer--so these aren't replacing existing cars that were already on the road, but rather are new cars that weren't on the road before. In India, May auto sales were up 14% year-on-year to 110,000 cars--that shows how much room to grow India has just to catch up to China's level of automobile penetration in the populace! GM expects global auto sales to increase 4% in 2008, meaning 2.8 million more vehicles will be sold this year than last. Especially considering that sales in mature western economies are expected to stagnate or decline, the majority of these new sales will come in developing nations where they are disproportionately more likely to represent a new, additional car on the road, not a replacement car.
The prospects for global demand destruction are not looking good. Oil is a globally fungible commodity--demand destruction in the US may be rising very slowly, but this is irrelevant in the face of rising global demand. Personal investments in cars increase the inelasticity of demand--when people have sunk cost in a car, it skews their calculation on the value vs. cost of consuming gasoline. Unless the trend in global car sales turns around, it's hard to envision a long-term retreat in oil prices...