Fundamental principles of economics don't work for oil

George Soros, who walked away with a cool billion dollars after his famous (notorious?) bet against the British Pound, has a few observations on the price of oil, and the future. Given his track record in the investment business, and his sharp intellect, I suspect that he knows what he is talking about, unlike me here :-)
Excerpt:

First, the cost of discovering and developing new reserves is increasing, and the depletion rate of aging oil fields is accelerating. This goes under the rather misleading name of "peak oil"—namely that we have approached or reached the maximum rate of world output. It is a misleading concept because higher prices make it economically feasible to develop more expensive sources of energy. But it contains an important element of truth: some of the most accessible and most prolific sources of oil in places like Saudi Arabia and Mexico were discovered forty or more years ago and their yield is now rapidly falling.
Second, there is a "reflexive" tendency for the supply of oil to fall as the price rises, reversing the normal shape of the supply curve. Typically, as the price of a product rises, producers will supply more. For oil producers who expect the oil price to rise further, however, there is less incentive to convert oil reserves underground into dollar reserves aboveground. Oil producers may calculate that they will be better off if they exploit their reserves more slowly. This has led to what may be described as a backward-sloping supply curve. In addition, the high price of oil has enabled political regimes that are both inefficient and hostile to the West to maintain themselves in power, notably Iran, Venezuela, and Russia. Oil production in these countries is declining.
Third, the countries with the fastest-growing demand—notably the major oil producers, together with China and other Asian exporters—keep domestic energy prices artificially low by providing subsidies. Therefore, rises in prices do not reduce demand as they would under normal conditions. This may be considered one of the fundamentals, although, under budgetary pressures, government policies are gradually changing.
Finally, demand is reinforced by speculation that tends to reinforce market trends.[*] This is a quintessentially reflexive phenomenon. In addition to hedge funds and
individual speculators, institutional investors like pension funds and endowment funds have become heavily involved in commodity indexes, which include not only
oil but also gold and other raw materials. Indeed, such institutional investors have become the "elephant in the room" in the futures market. Commodities have become an asset class for institutional investors and they are increasing their allocations to that asset class by following a strategy of investing in commodity indexes. In the spring and early summer of 2008, spot prices of oil and other commodities rose far above the marginal cost of production and far-out, forward contracts rose much faster than spot prices. Price charts have taken on the shape of a parabolic curve, which is characteristic of bubbles in the making.

Soros said these on June 3rd. Where is the price of oil now? Bloomberg reports that "Crude oil for October delivery fell $2.10, or 2.1 percent, to $99.08 a barrel at 1:22 p.m. on the Nymex. Futures touched $98.55, the lowest since Feb. 26."