There is a great article and running discussion on “The Economics of Volatile Oil Prices” at TheOilDrum.com.  The author, Phil Hart, does a very nice job breaking down the change in oil prices over the last few years.  He explains how the basic rules of supply and demand have had a powerful impact on the wild price fluctuations.

In the first comment, a reader points to the YouTube video below called “Gas Prices, Gas Gouging, Peak Oil, Elasticity, Supply Demand”.  This video simply demonstrates how the supply and demand curves have moved to cause the price spike and then recession:

As I read this article and watched the video, I gained a better understanding of the events of the last 3 years.  I also see how this cycle will definitely repeat itself in the next few years.  Once demand returns, prices will spike again.  It seems like we have a window of opportunity now to change our consumption habits before the next spike, but will we do it?