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It's tempting to believe that oil prices near $55 a barrel -- which is where they are as I write this -- are a blip on the screen, soon to retreat to more comfortable levels. But don't count on it.

When I asked Constellation Energy CEO Mayo Shattuck on our latest program whether he thought prices would be higher or lower a year from now, he didn't hesitate: "I think higher."

» Energy discussion, Oct. 15, 2004 » Kicking the oil habit » Energy candidates

Obviously prices will fluctuate, but there are plenty of reasons to believe Shattuck is right in believing the long-term trend is up, which would affect every person and every business in the country. To see why, think about the various factors that could bring the price back down.

Start with increased supply. When the price of anything goes up, suppliers have incentives to make more of it. That's certainly true of oil, but it can't happen very quickly. Bringing new production on line is a big, heavy, expensive industrial process. Owners of existing wells can pump more oil out of them, but only so much more. OPEC can open the spigot, but no one can make them, and they don't seem in a mood to do it on their own.

Looking further into the future, companies will drill new wells and use new technologies to squeeze oil out of increasingly less hospitable spots and out of shale. But that takes years.

The fundamental problem is that oil is a finite resource, which means the day must inevitably come when world production peaks and then begins to decline. The question is when that day will be. A few mavericks in the oil geology world believe it has already arrived, but most experts disagree. Not that anyone knows the answer for sure, but estimates from 2020 to 2035 are most common. So at some point in the not too distant future -- 2020 is only 16 years away -- the amount of oil getting pumped out of the ground will be less every year, even though demand will be more every year. In that scenario, prices can go in only one direction.

And how can we be sure demand will be increasing? Consider the next factor affecting oil prices: Substitution.

Another fundamental of economics is that when the price of something goes up, buyers increasingly use substitutes for it. That's happening with oil, but on a tiny scale. It's true that Toyota can't keep up with demand for its Prius hybrid car, and Ford and Honda have introduced hybrids of their own. But their effect on demand for oil is minuscule in the developed economies where they're available, and on a global scale the effect is unnoticeable.

That's because the biggest factor in rising demand for oil is China, which is still a long way from using hybrid vehicles. And even though the growth of China's economiy is slowing, that economy is still growing fast. So is India's. As those and other developing countries hurtle toward Western-style car-based economies, they're demand for oil will multiply. So it seems a pretty safe bet that global demand for oil will continue to increase for years into the future.

Of course, there's yet another factor affecting oil prices: Less consumption. When the price of something goes up, people buy less of it. But the nature of our demand for oil means we don't decrease our consumption very much as prices rise; economists describe our demand as inelastic. Millions of Americans drive to and from work every day, with few other options for getting there. If you heat your home with oil, you can turn down the thermostat, but only so far. Obviously we can and do cut consumption when oil prices rise, but in the short term we don't cut it very much.

In the long term we could see a dramatically different picture. Companies we haven't heard of could develop hydrogen-powered cars that cost less to run than today's vehicles. Solar power could become radically more efficient. Tidal power could become practical. Even nuclear power generation could become politcally palatable.

But none of this will happen in the coming year. That's why we should all get used to today's oil and gas prices. They'll move up and down day-to-day, but the big picture is that we should plan for energy that's more expensive than we're used to.