What Do Falling Oil Prices Tell Us about War with Iran, the Elections, and Peak-Oil Theory
By Michael T. Klare

What the hell is going on here? Just six weeks ago, gasoline prices at the pump were hovering at the $3 per gallon mark; today, they're inching down toward $2 -- and some analysts predict even lower numbers before the November elections. The sharp drop in gas prices has been good news for consumers, who now have more money in their pockets to spend on food and other necessities -- and for President Bush, who has witnessed a sudden lift in his approval ratings.

Is this the result of some hidden conspiracy between the White House and Big Oil to help the Republican cause in the elections, as some are already suggesting? How does a possible war with Iran fit into the gas-price equation? And what do falling gasoline prices tell us about "peak-oil" theory, which predicts that we have reached our energy limits on the planet?

Oil analysts are raising their price estimates for next year in anticipation of increased demand that may outpace the development of new deposits.

Crude oil will average $64 a barrel in New York in 2007, according to the median forecast of 29 analysts surveyed by Bloomberg News last week. That's $2 higher than predicted at the end of the second quarter. Analysts failed to predict the rise in oil throughout a five-year rally during which prices tripled.

Recession fears are being reported as affecting the oil markets. Oil prices tumble over fears of US recession is typical.
Oil prices have dropped to the lowest level in six months, as markets' concerns about geopolitical instability are replaced with worries about an impending US-led economic slowdown The plunge in oil prices has hit mutual funds for $4.5bn (£2.4bn), and there are fears that more investors could fall victim to unexpected falls in energy prices...

JORGE BARRERA, Ontario Sun
Municipalities are facing a "perfect storm" once the era of cheap oil, cheap water and altered weather patterns hits with full force, says Ontario's environmental commissioner.

In a chilling speech to municipal leaders yesterday, Gord Miller said municipalities are not ready for the massive effect on communities.

"We are entering a period of consequences," said Miller. "Our present public policy is inadequate to deal with these immense problems that are upon us right now."

Mathew Maavak, The Korea Herald
Crude oil has reached a point where the skeptics of yore have become the proselytes of tomorrow, readying the world when crude tops $100 per barrel.

That day is not far away though few saw it coming.

Only just six years back, crude was hawked off for as low as $10 per barrel, when producers pumped out whatever they could for hard currency in the aftermath of a serpentine financial crisis that slithered its way from Mexico to East Asia, emptying national coffers in the process.

Bloomberg
The world may soon pay more than ever for its most abundant food: rice.

A record crop this year in a market anticipating rising production costs will do little to slow the rally for the staple of 3 billion people. As China, the No. 1 consumer, and Vietnam, among the biggest exporters, continue to plow under their paddies, rice will double within two years to almost $20 per 100 pounds from $9.90 now, according to Stephan Wrobel, chief executive officer at Diapason Commodities Management SA in Lausanne, Switzerland, which oversees $5.5 billion...

by Kurt Cobb

Civilization, that is, the congregation of people in large settlements we call cities, is thought to owe its origins in part to the invention of agriculture. By growing surpluses of food crops farmers enabled the creation of an urban non-farming class who engaged in all manner of cultural, governmental, and commercial activities. These activities now preoccupy the vast majority of people in advanced economies.

Stephen Corley, ITP - Business
...Despite the well-documented collapse in Arab stock markets - and the domino effect effect on spending - high liquidity from oil revenues looks likely to remain the region’s defining feature for years to come. Meanwhile, of course, the rest of the world is frantically assessing more short-term economic ramifications of price spikes.

Yet, although some may wail, oil prices are not breaking all-time records. Nor are they anomalies caused by headline-dominating geopolitical unrest: the violent conflict that continues to engage Israel and Lebanon has, in truth, almost no effects on oil prices, as it presents no genuine threat to supply. Current prices simply reflect another step in the longest upward march in the history of oil trading - indeed, a trend that has dovetailed with perhaps the central issue confronting a generation - as global demand increases for a finite precious resource.

Lewis J. Walker, Free Market News Network
Let’s accept the idea that the era of cheap oil may be over. But also accept Austin Kiplinger’s premise (see last week’s Crier column) that the problem itself- the U.S. seen as held hostage to rising global energy demand and unreliable sources - suggests new trends. As an investor, you may wish to consider wealth-preservation and growth strategies within energy independence trends.