This morning we saw a sharp drop in the price of crude oil futures as a result of decreased U.S. demand of gasoline. Oil futures have now fallen to ~18% from July 11 prices, when oil almost reached the $150 marker. Light, sweet crude on the NYMEX for September delivery contracts traded $3.31, or 2.7%, lower at $121.42 a barrel making it a low since May 15th.

Energy is the bloodline of today’s economy. For the past 10 decades the developed world has become extremely dependent upon very cheap and abundant flowing  energy provided mainly by hydrocarbons. It is this energy supply that has initiated and helped to sustain the global economy we live in today.

As oil, the world’s most precious commodity becomes more of a scarce resource and harder and harder to access; new ways are going to have to be developed in relation to rationing this valuable resource. A task like this will require not only a carefully orchestrated plan but also cooperation from the international community and the majority of the consumer base. Demand-side management, through increased efficiency and conservation, will become one of the most effective ways for users to decrease dependency on oil.

Moreover, once oil hits peak production, the world’s population will be forced to establish ways to conserve its oil and other energy sources. This shift will force a revolution in the way people think in relations to transporting people and products around the world. Transportation in general turns out to be the biggest single user of oil. (Simmons, 2005) With diminished reserves to sustain our current transportation trend we need to begin finding ways to minimize everyone’s transportation needs and make the best possible use of transportation fuel as efficient as possible.

One thing is inevitable - that a world of inadequate oil reserves will foster a growing competition among energy consuming nations. This competition could result in two ultimatums: either a controllable process with cooperation between nations and international oil companies or an aggressive free for all that could potentially trigger a new era of oil wars. This issue has already been a central element in all the major wars of the twentieth century and most recently in the United States’ two interventions in the Middle East. (Simmons, 2005) Understanding the risks, all nations should be able to recognize the necessity of working out comprehensive ways to allocate an increasingly scarce supply of oil to the world’s many deserving countries.

Recently high oil prices is unavoidably also triggering a substantial influx of money to all oil exporting nations, even as we witness increased cost of exploration and production in the industry. With proper guidance and major technological advances these oil-producing countries will be able to make the most of the revenues that higher oil prices create for the betterment of their nations. It will be imperative for major oil producing nations to wisely invest their imminent profits toward creating modern societies that work beyond the barrel.

Furthermore, the most aggressive new entrants into the international petroleum markets are China and India. These nations combined inhabit over 2.2 billion citizens and are the two fastest growing economies and oil consuming nations, outside of the United States. (Rosenberg, 2007)