When his hedge fund, Clarium Capital, launched in 2002, Thiel followed a peak-oil thesis, which paid off splendidly as oil prices rose from about $40 to $140. But prices fell off a cliff in 2008, the fund got clobbered, and institutional investors fled. He licked his wounds and soldiered on. We decided to ask him how he’s faring and what he’s thinking now that crude oil prices have fallen from about about $105 in June into the low-$80 range today.

Fortune: How has Clarium Capital fared during this period? Did you expect this, or are you taking a hit?

Thiel: Generally, we’ve not been long oil the last few years. I think this is a point, though, where I would start to be somewhat bullish on oil equities. I don’t think the price can go down much more.

With prices in the $80 range, has the peak-oil thesis been thoroughly discredited? Aren’t we facing a glut?

From the vantage point of 2002, it is the case that oil prices are still quite high. In 2002, the long-term oil prices were expected to be around $25-30 a barrel, reflecting the expectation that prices would revert to the pre-9/11 crisis levels. We’re now at $80 a barrel. So it certainly is higher than people would have thought at the time. If you had said back then, “Well, there’s going to be a huge fracking revolution,” that’s been offset by all these increases in global demand, especially from China.

More narrowly, from 2011 to 2014, after oil spiked to around $110 during the Arab Spring and then held around there, the move back to the $80-85 range is a very welcome relief. It’s being driven in part by supply increases in the U.S. and then there’s also this relentless decline in demand. In part, because the economic recovery is slow. But then the good part is that there is this steady tightening of CAFE standards in the U.S. [The federally enacted Corporate Average Fuel Economy regulations currently require manufacturers to achieve an average fuel efficiency of 54.5 miles per gallon for cars and light trucks by 2025.]

Are we benefitting from that already?

I don’t have the exact numbers but U.S. oil consumption has come down a lot since 2005-2006. [It dropped from about 21 million barrels a day in 2005 to 19 million in 2013.] That’s a combination of the recession—fewer people are working, people are driving less—but also we’ve shifted back to smaller cars. Hummers are out of fashion. I think the CAFE standards are one of the very understated things going on relentlessly beneath the surface and will keep going for 15 more years. Cars here are still much bigger than in Europe or Japan or rest of the developed world.

You always think of conservation as not the greatest form of innovation—ideally, you’d like completely new sources of energy—but there’s actually a lot we can do on the conservation side.

So you have the CAFE standards, the ongoing fracking revolution, and that’s buying us a fair amount of time. On the other hand, I’d be surprised if oil can get much lower than $80 a barrel because the cost of fracking is pretty high.

Fracking technology always gets cast as this technological improvement. I think it’s in some sense inferior to past oil extraction technologies, because it’s dirtier and more expensive. It’s sort of a stopgap. I always want to push back on its being framed as this technological panacea.

I think we’re still in the sort of in-between zone, where the fundamental technological problem [of finding new, sustainable energy sources] has not been solved, but we have more time than we would have thought.

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