Back in the bad old days of 2008, before Lehman went, there was talk of economic problems ahead, but many people just didn’t believe them.

Back then oil approached $150. It seemed the black stuff was set to go up and away in price.

This column predicted oil would fall back all the way to $70. We were not unique in making this prediction, but we were certainly unusual.

Well, if anything, the fall was understated, and at one point, about a year ago, oil was down to $35, before rising.

Well, now, oil is up again, at least relatively. At the time of writing it is a shade over $80, but thanks to the cheap pound is not a lot cheaper today than it was at peak. At peak, oil was around £70; as at the time of writing it is £54. So while oil in dollars may be around half the peak price, measured in sterling it is still cripplingly high.

But now Capital Economics has forecast that the black stuff will fall back again, this time all the way to $60. Is it right? Or is it possible oil will fall back even further?

Actually, there are similarities between the arguments over oil and with house prices. The argument that says house prices always go up suggests that supply is short, so price rises are inevitable. The counter argument is that no matter how short supply, house prices can not rise to a level at which they are unaffordable.

It all boils down to what economists call price elasticity of demand.

If demand is price inelastic, then a change in price will have little effect on demand. It seemed as if this was the case with oil in the 1970s.

What we in fact found with oil, is that it is only price inelastic in the short term. In the long term we adjust to high prices by finding alternatives. For example, the speed limit in the US was cut. Fuel efficient cars become more popular. At the same time, the high price of oil drove up exploration budgets, so in time supply rose. The UK, for example, exploited North Sea oil. If oil had stayed cheap, this may not have happened.

It was like that in 2008. Oil shot up, and was unaffordable. After a while price crashed.

Of course, back then, many economists, not to mention markets, had their head buried in the sand on how serious the burgeoning economic crisis was.

The credit crunch had another effect. It meant less money was available for investing, and that hit oil exploration. So when demand was up in the stratosphere, seeds were sown for a crash in demand, but not for a rise in supply.

Right now, there’s déjà vu. The economic prognosis for Europe and the US is not good. It is clear that much of the recovery seen so far is down to the turn in the inventory cycle. Once the fiscal stimulus goes into reverse, there has to be a chance of another dip in growth.

Recession remains a possibility for later this year.

China is probably in the midst of a bubble, and we all know that bubbles burst.

Right now, the prognosis for oil demand later this year is not good.

Don’t be surprised if oil falls back, maybe all the way to $35 again.

Looking further forward, however, lack of investment means the supply problem is not being cracked. No doubt the credit crunch has hit development of alternatives to oil, too.

China’s economy may well hiccup later this year, but China is not even close to seeing something analogous to Japan’s lost decade.

In the medium term, oil will go shooting back up, this time beyond $100. It will only fall back when renewable sources of energy become viable as alternatives to oil.