I find it fascinating too the focus on pricing we see. Analytically, everything revolves around supply and availability. Monetary worth is purely a side effect and not very important in the greater scheme of things. Economists show their stupidity by always referring to "fundamentals" when in reality they have yet to come up with any kind of model for oil depletion. It could be the case that no one field of study uniquely covers constrained resource exploitation. Economics definitely doesn't cover this.

This is the sort of empirical analysis that puts the lie to all the current chatter in the media that the days of high oil prices are over. The plateau cannot be explained by demand being flat as clearly reflected in the exponentially increasing price. Therefore the plateau was maintained by the development of marginal and unconventional oil fields, which of course was expensive and solidly in the realm of diminishing returns. I expect the plateau to turn into a decline now that the price does not justify expensive field development (exhibit A: the Canadian tar sands). The plateau is a transient feature regardless of oil price but the current financial meltdown will shorten its life.

Good points, Westexas.

I wonder what's happening to spare capacity. When the public works are in full swing from Peoria to Paris to Peking (or is that Boston to Berlin to Bejing?)how long will it be until the oil industry is back to the high cost barrel?

Apart from the availability of financing, it seems to me that the industry will not be well served by too much spare capacity, as this would keep the price of oil down, at a time when higher prices are required to overcome the cost of the marginal barrel.

The global economy is still expected to grow next year is it not? Why would that cause a decrease in oil consumption? And especially now that oil prices are at multi-year lows? As long as the global economy is growing we will still see stable or increasing global oil consumption next year.

The depression we are headed for will be global. Everyone will be reducing demand involuntarily due to a collapse of purchasing power. Remember that demand is not what you want, it what you are ready, willing and able to pay for. As the credit bubble implodes, taking the vast majority of the effective money supply with it, demand will fall dramatically, but so will supply as falling oil prices make more and more projects non-viable. We will also see a significant impact on supply from lack of maintenance, fighting over control of infrastructure, sabotage by those with nothing left to lose and piracy in an era of neo-mercantilism. The result will ultimately be far higher oil prices that will price ordinary people out of the market almost completely.