The End of High Oil?

Is the several years of our discontent over? Have we finally seen the end of high oil prices?

And is it any wonder that prices have started falling, now that Bush is nearing the end of his last term in the White House?

It may seem like it's been forever, but this week gas prices started coming down. Of course, by the time you are reading this, they may be back up again, but at least some experts are predicting light at the end of the tunnel.

Of course, some experts are also predicting even higher costs.

Well, that's how the Associated Press put it earlier this week. Does anyone remember when $136 for a barrel of oil would not have been considered good news?

Oh yeah, wasn't it, like, two months ago?

Anyway, for better or for worse, oil showed a significant drop the first two business days of the week. Of course, that does not mean there won't be increases as well.

Anytime there is a quick drop or a quick upswing, there is often a correction shortly thereafter. Oil dropped has dropped by $15 per barrel in recent weeks and counting

Of course, this may be the sign that oil will begin falling steadily. As long as the declines outpace the advances, drivers will be happy.

In the best case scenario, oil could defy history and drop like a rock. But don't count on that happening. That would be too much good news.

In the meantime, the most we can look forward to is a few less cents out of our pocket, per gallon, at the gas pump.

And there is even more good news. Experts have said the supply side of the equation is fine - that there has not been a supply problem for quite some time.

So why the high prices? Well, we'll get to that in the bad news portion. For now, let's suffice it to say there is no good reason. Many analysts say oil has been in a bubble, much like the housing market, and it would only be a matter of time before that bubble bursts.

But the news may not be all good. While many have said oil would begin to fall, no one is (or was) quite sure when. Some predicted it would happen after the busy summer driving season.

However, this seemed like a rather short sided view. World oil prices are not determined by vacationers in the United States - not to a large extent, anyway.

World oil prices are determined by world demand. Vacationers in the U.S. make up a very small portion of that demand.

This is where the bad news starts. World demand has been steadily increasing because of surging economies in Asia.

If they continue to develop like they have been, that could be very good for the world, but very bad for those of us hoping for cheap gasoline.

Speculators haven't helped, either.

While demand can explain some of the recent price increases over the past six years, it would be hard to say that explained all of it.

In fact, those speculating about crude oil have worked to create the previously-mentioned bubble. If it pops, they may lose a bunch of money.

But don't feel sorry for them, every time you put gasoline in your car you lined their pockets, in a very disproportionate way, for the past eight years.

Oil prices will go up. The price of everything goes up and as we use more oil, we deplete resources. Existing oil is harder to tap (otherwise it would have been tapped by now). So all that works against the price-conscious consumer.

The key is to keep oil prices from skyrocketing past the cost of normal inflation. That may be hard to do, but alternative energies, and more oil in the marketplace, are good starts.

Some in the industry will say this is a correction -- that oil went up far slower than the proportional cost of everything else in the mid to late 80s and 90s. I don't think anyone will be weeping for them, as they obviously had no trouble turning a profit even then.

So they may claim we all had this coming. At some point, things will fall into equilibrium. Then, we can go on to worry about more important matters.

Of course, none of us know what those are yet because we've been so focused on oil prices for the past decade.