Tell me about it. My dad and two brothers are oil men. I'm a farmer/rancher.

I'm sitting on a silo full of corn and a tapped out credit limit at the local bank. Do I sell the corn for more than it will cost me to replace it so I can plant more, or do I sit and wait for people to get hungry enough to allow me a profit on the work I have already done?

My dad/brothers have leases for natural gas projects now in moth balls.

They're preparing to drill a few potential oil wells, but I'd say this is just momentum at work--they had already been planned and initiated before the price collapse. The leases were expensive, acquiring a drilling rig and the necessary pipe and casing was also difficult and expensive.

Being Austin Chalk type wells he's drilling, potential production comes in a flurry and goes away quickly.

$145 oil was too high, too fast. $70 oil works for existing production but not so well for new hard to find and expensive future development. Existing production as we all know is in decline.

Hell, buying existing 3-D seismic studies run $40,000 a square mile in these parts.

Like Westexas, I was genuinely surprised by the collateral damage in food and energy. It isn't that I wouldn't have anticipated declines, but I wouldn't have thought them to respond so quickly - in fact, I have the sneaking suspicion, at least with food, that the declines in price are a little over rapid, and that we won't see more volatile price changes.

Biofuels will obviously be the big factor in food prices in the coming years - best hopes for the end of the ethanol boom.

Sharon

I was not surprised by a drop in a oil prices brought about by the financial crisis, nor by the financial crisis itself -- many, many people saw that coming. But I was surprised by the extent of the drop. In that respect,

8. Increased volatility when supplies are very tight.

is the most relevant point, the whale oil anecdote most interesting. If the tendency is for production to follow a bell curve, and demand to follow an undulating curve, well, somewhat sawtooth like, overlaid on the production curve, then price is apparently A*gap + B. What's surprising is how big a multiplier A is.

Not only is the market totally irrational (blind is perhaps more accurate) in the long term pricing of finite resources, it is totally irrational even in the very short term pricing.

One of the several things gov't should be doing is taxing the gap to smooth the price curve and assure that it goes only up, fast enough to reflect depletion, both to gather revenues for the necessary restructuring and to send the right message about the need to restructure.

Edit: I will be very surprised if the low oil prices lasts even a year, given all the countervailing forces.

Rockman,

I have a little bit different observations from my side of the oil patch. I am the finacial analyst (aka moneyman) for the exploration dept. of a mid-sized permian basin player. We are definately cutting way back on what we will drill next year. The slowdowns haven't happened yet... we are still drilling wells that were approved earlier this year, but as soon as is feasible, we will be releasing rigs not under contract and our drilling pace will drop by over 50%.