Presentations by Thomas A. Petrie, vice chairman of Bank of America Merrill Lynch, draw large, attentive crowds. At a recent event hosted by the Independent Petroleum Association of Mountain States, the audience listened intently to his views on topics ranging from peak oil to geopolitical trends to hybrid vehicles. With nearly four decades of industry experience and $180 billion in transactions informing Petrie’s forecast, the atmosphere in the room recalled Warren Buffett’s annual address to investors of Berkshire Hathaway.

Throughout, Petrie sounded the theme of profound change. “The future is arriving at warp speed,” he said. “We’ve entered a period of discontinuity in historic trends.

“One of my beliefs from that discontinuity is that the progressive maturity of the resource base, at 80 million-plus barrels per day of global production and consumption, is going to translate into a peak-oil event.”

Low-cost oil is in irreversible decline, he said. He overlaid on an International Energy Agency chart of world primary energy demand (with demand expanding by 40% between now and 2030) the notion that the marketplace this year or in 2015 will see market recognition of peak oil. “We’ll know in a few more years if the upward slope of demand that the IEA has built in is accurate,” he said.

According to the IEA, there must be real, absolute shrinkage in consumption of oil throughout the OECD (Organization for Economic Cooperation and Development) countries to accommodate disproportionate growth from non-OECD countries, including China (42%), India (17%), and others.

The dynamics of consumption are also in flux. From 2008 to 2030, annual per-capita oil consumption in the U.S. is projected to drop from 22 barrels per person to 17; for Japan, from 13 to 10 barrels; and for Europe, from 9 to 8 barrels. But the BRICs (Brazil, Russia, India and China) will post rises of 1 to 2 barrels per capita.

With demand increases from the BRICs and Middle East totaling 17.1 million barrels per day by 2030, Petrie doubts supply can keep pace. He looks for a step function to a weighted average price of $100 per barrel between now and 2015; sluggish world economic growth would delay this but result in a bigger step in the mid-2020s to $160.

An important caveat is whether China’s forecast demand growth is a bubble.

Petrie warned of the “financial tail wagging the fundamental petroleum dog.” The last oil spike was partly a factor of decision makers in the developed world losing faith in U.S. and other OECD policymakers.

“When you take into account the new economic and commodity-based power triangle of Russia, Iran and China, and combine it with perceptions of ineffective policies by OECDs, money managers seek and have far more hedging options. They buy gold, oil and other hard commodities.

“With commodity ETFs (exchange-traded funds) as a growth sector for financial players, so it is to some degree for gold or oil ETFs. The money put in results in the additional purchase of the commodity, and it can be a self-reinforcing process.

“Absent structural changes, that process will probably continue. Combined with growing disillusionment on policymaking, we could revisit $100-plus oil, not because of demand but because of the structure of ETF participants.”

The natural gas supply picture is the best Petrie has seen in a long time. “The growth in production in North America is real, sustainable, but still being defined in terms of price elasticity. The good news is North America can be self-sufficient in gas for a number of years and even decades.”

The shale plays combined with liquefied natural gas (LNG) import capacity from the Middle East, Asia and Norway will sustain the growing appreciation of benefits and reliability of natural gas. The U.S. import capability of LNG in the past 18 months has tripled, but will not operate at full capacity.

The recent Environmental Protection Agency rules on greenhouse-gas emission reductions will help mitigate supply overhangs and motivate substitution of gas for other fuels, Petrie said. His gas price forecast is for $2.50 to $8 per thousand cubic feet in the near term, with “seasonal excursions toward the lower end of this range.”

On alternative fuels, Petrie expects the Obama administration to push hybrid vehicles. “It’s the best option we have, but it will take a lot longer than policymakers think—it doesn’t happen in 10 or 15 years.”

The risk on energy policy is that it will be designed in committee, as was health care, with questionable effect. “The real key is you have to get the sequence right.” Like Exxon, Petrie prefers a carbon tax as more rational and equitable than cap-and-trade.