Oil prices have seen a fifteen percent run-up this year alone, but Marc Faber, Editor and Publisher of the The Gloom, Boom & Doom Report says oil prices still have more room to rise, under both optimistic and pessimistic scenarios.
"If you take a very optimistic view of the world, namely a global economic recovery, demand in the western world will pick up, and demand in the emerging world will continue to rise very strongly, and so from a very optimistic point of view, you should be long oil." he told CNBC on Tuesday.
On the flipside, he said political uncertainty in the Middle East would also add to the bullish case for oil .
"In a very pessimistic scenario, you have to assume the unrest will shift also to Saudi Arabia and other countries in the gulf, and at that stage, maybe production may be curtailed, and in that case, obviously oil would go up ballistically... In both cases you should be long energy and energy related shares."
Faber pointed to the supply shortage and sustained demand from emerging economies that would underpin higher oil prices.
"The fact is the world is burning more oil than it's adding new reserves. So the level of overall proven reserves, or the existing oilfields - that production will go down," Faber said. Finding and developing new oilfields, he added, was a "difficult" and "costly" exercise.
Faber said he didn't favor investing in commodity ETFs given the high rollover costs. Investors in ETFs, he said, were bound to lose money in the long run given these costs.
"In the commodities space, either you go long commodities yourself through the futures market or you buy companies that produce commodities," he advised.
Contrarian Call on Dollar
Faber, who has been famously bearish on the dollar and critical of the Federal Reserve's easy money policy, said he expected a reversal in the recent bearishness surrounding the greenback. Latest data from the Chicago Mercantile Exchange shows hedge funds and forex traders are betting record amounts against the U.S. currency.
Total short positions equaled $39 billion in the week to March 1st. But Faber said he expects a rebound in the dollar and U.S. government bonds over the short-term.