Watch for falling prices

Latest facebook fad? Change your middle name to Hussein.

I'm keeping my phone-camera ready, local gas prices are poised to hit $1.99 any day. Nice.

One of the byproducts of the U.S. economy's suddent penchant for emotion-based investing is the housing market collapse caused a jump, and then a violent correction in the oil market. Oil prices peaked on July 11, 2008 at $147.22 a barrel. At the time, almost everyone agreed that the price of oil was being artificially inflated by speculation, emotional investment, Hurricane hyperpanic, and mixed and confusing reports about demand for oil in Asian countries. At the time, my business-savvy cube-neighbor at work, Austin, predicted the market would correct within a few weeks. I then predicted that once the sell-off began, it would accelerate. Oh, how right I was.
By September the price was in a free fall. When it neared $100/barrel we watched it like a football game. When it hit $80 we laughed at Austin's foresight.
Around the time it hit $80, the Saudi oil minister predicted that $75-80 would be the sustainable market value for a barrel of oil. Anyway, it is now trading at $63, and was dropping Friday despite an OPEC cut of ~2 million barrels.

This is a disaster globally, and emphasizes just how much communist and totalitarian governments with oil supplies depend upon America's oil addiction to support their own regimes.
Some highlights:

Iran: Mahmoud Ahmadinejad, elected to the head of the populist party on the platform of distributing the oil wealth to the populace, faces a difficult battle for reelection with oil profits drying up. The Iranian representative at the OPEC meeting Friday said anything below $90 would hurt the country greatly.

Venezuela: Rafael Ramírez, the Venezuelan energy minister, lamented at the OPEC meeting that Hugo Chavez' expansive social programs require $100/barrel oil. Some experts believe the populace, now wealthy and educated enough to do something, might be more amiable to a coup than they were 5 years ago.

Qatar: Desires a range of $70-90 to be profitable.

Libya and Nigeria: $80/barrel or they can't buy Russian equipment to keep the locals "contained."

All this adds up to two truths:
1. American economical ramifications and the downtick of global markets can hurt dictatorships as much or more than it can hurt free markets.
2. We need to be aware that as communist and totalitarian regimes' purses dry up, their people will suffer and humanitarian efforts may be necessary.

Wait, I forgot a third truth:
3. As much as "breaking our dependence on foreign oil" sounds like a great plan, it also means drying up the governmental revenue that supplies much of the developing world with its daily requirements. Many of the countries that export large quantities of oil are also countries with huge, destitute populations. By not buying their oil we would rob their economy of their single greatest source of income. Imagine, if you will, what would happen to Germany if suddenly their export revenue was cut in half. Their economy would collapse overnight. Although the high oil prices are only 8 months old, and oil was in fact around this price last year, and half this price the year before, many nations that export oil were promised by their economic advisors that $100/barrel was the new floor, and many predicted $200 oil. Those nations then fixed their budgets based on that increased revenue, and are now trimming fat...as fast as they can.
Although I do not condone high oil prices, nor do I necessarily condone gas-powered vehicles, we must stop and remember (once in a while) that what happens in America has far-reaching consequences for better or worse, and sometimes what is better for us here in the States is much, much worse somewhere else.


p.s. Want to read about obscene power at its worst? Hugo Chavez' seizure of U.S. oil companies' interests in Venezuela in the last 5 years reads like a bully taking a little kid's lunch money and then sharing it with his bully friends to buy some drugs.