KB... 

Basic economics are noting more than a theory which is supposed to fit most real situations.  But no true economist would expect a perfect fit, and would have to make allowances for actual conditions.  In the case of petroleum, one has to look at relative cost of replacements, and see what price level oil would have to reach, to be viable replacements.  Oil, even at $80 a barrel is really cheap compared to most alternatives, when one takes into account ALL costs.  So...while its true that replacements will assert themselves at higher prices, we are far from the point of a wide array of such crowding out oil.  If you have read even one book on the subject, (happy to direct you to some), you would know that the more credible peak oil proponents do discuss such alternatives.  None of these peak oil folks, or even the major oil companies, see these replacements as viable for many years to come.

And so now China is the only source of oil use?  We need to look at global oil consumption growth, or you will not really understand what is going on.  Bottom line, developing and newly developed countries are experiencing huge growth in use of oil, but supply is remaining relatively static.  Oil consumption has only shown one meaning reduction in decades, and that was from the 70's oil embargo.  Why would we expect this multi-decade trend to just reverse?  It might with oil at $150 a barrel, but that would be because the world economy is keeling over.  Not a good way to manage consumption.    

I would also like to point out that you have been wrong about the price direction of oil for many years now.  Maybe your theories are not in synch with reality?