Current crude oil prices are always a hot topic as crude oil is refined into so many products that are essential for the developed world to operate. Many people believe that the price of crude oil on the market should be a good indicator of how much gasoline should cost. This is generally true with some allowance for local challenges in the refining and distribution of refined products.

For example, a hurricane in the Gulf of Mexico may not cause much damage to oil rigs operating in the Gulf but strike a serious blow to refiners located in Louisiana. While ample supplies of crude oil may be available for refining operations if the refineries are damaged crude oil will not be refined into useful products, like gasoline. Until the oil refineries are repaired there could be shortages in the supplies of gasoline and other refined products, like jet fuel, and price spikes could occur.

After soaring in 2008 the current crude oil price is again at a relative moderate level at around $40 a barrel. This is good news for the consumer for now but will be bad news long term. At current prices all alternative energy solutions will have a very hard time competing against oil in price. That will slow down development of renewable energy sector worldwide. Public interest for those alternative energy sources is already falling.

The current crude oil price is setting the stage for a huge price spike at a later date, probably not that far into the future.

The media has made much of the oil price decline from $147 to a current level below $40.00 a barrel. The emphasis has been placed on worldwide demand destruction due to the slowing world economy and the outright financial meltdown in the United States. Actually, much of the tremendous drop in oil prices is due not to supply and demand considerations but to the forced liquidation of crude oil futures contracts as margin calls over powered hedge funds and large investors who had used excessive leverage to position crude oil contracts on the way up in price.

As oil prices fell along with almost all asset classes forced liquidations by large investors caused a death spiral that was self reinforcing. The unrelenting feedback loop caused by deleveraging was impossible for many over leveraged operators to pull out of. They had to sell good positions along with the bad.

While under present demand conditions some demand destruction has surely occurred the current crude oil price has likely overshot the mark on the downside. At current oil prices exploration projects are being shelved and alternative energy projects are being abandoned. The current crude oil price is probably not going to last long. While demand has declined in fast growing economies like China, India, Russia, and Brazil the sheer numbers of their people moving up the economic ladder into middle class status will drive oil demand as they purchase automobiles and use a lot of energy produced from crude oil resources.

For the past several months crude oil prices today have been difficult to keep up with without developing a headache. From a high of about $147.00 a barrel in July 2008, to a recent low of just under $35.00 a barrel crude oil prices have had gut wrenching daily price fluctuations.

There is little hope of near term price stability. The worldwide financial market meltdown, the slow down in crude oil demand as world economic activity decreases , the continued rapid decline of crude oil production at the world’s major oil fields, and the rapid long term growth in oil products demand, even if it is at a slower pace than last year, in countries like China, India, and Brazil, will keep crude oil markets active and extremely volatile.

The ebb and flow of supply and demand factors along with the cancellation of oil exploration and production projects due to current relatively low prices are setting the stage for another price explosion within the next couple of years.

There is little hope that any combination of alternative fuels will replace the dependence of the developed world on oil as the prime energy resource at any time in the foreseeable future. Crude oil prices today will continue to be closely watched by investors across the globe.