Last spring I opined that barring global economic catastrophe it was difficult to see a downside in global oil prices. The catastrophe has indeed occurred. Last July\u2019s perceived shortage of crude oil turned into a perceived glut a few months later. In response, oil prices have fallen to one-third of the peak value reached in July. The price impacts the electricity industry because natural gas prices track oil prices. There\u2019s a lesson to be learned from this amazing and unprecedented rise and fall in the price of oil. As the price climbed, consuming nations badgered the Organization of Petroleum Exporting Countries to increase production and global supplies. As shown in the accompanying chart, oil supplies did increase a year ago. That increase, however, merely restored production to levels attained in 2005 and failed to prevent prices from continuing upward. As prices reached their peak, OPEC managed to increase production again, only to see the bottom drop out of the market as the global economy cratered. Today, OPEC is trying to curtail production to keep prices from dropping even lower as economic woes reduce consumption. The wild swing in prices during the last year shows how sensitive the market is to small changes in the supply\/demand balance. Little oil is stored aboveground, so the amount being extracted must nearly equal the amount being burned. When production lags even a little bit, prices climb rapidly, only to plummet if consumption falls slightly. Official prognosticators such as the International Energy Agency (IEA) are increasingly pessimistic about future supplies. The most recent IEA annual report notes that existing fields are being depleted at nearly 10 percent per year. Maintaining even current levels of production would require rapid development of known but undeveloped resources and discovery of new resources. If sufficient new oil is not forthcoming, maintaining production at recent levels of about 74 million barrels per day is not possible. Some analysts believe the plateau in crude oil production since 2005 shown in the chart represents the behavior expected as supplies reach peak levels before beginning a gradual decline. Pooh-poohed previously, this \u201cpeak oil\u201d theory is gaining credibility. Even the usually optimistic IEA admits it is a plausible explanation for recent events. Every politician on the planet is now promising to rebuild the economy. Unfortunately, this almost certainly would also rebuild demand for crude oil unless the new economy is radically different from the old. A bonanza of additional oil sufficient to allow continued expansion of an oil-guzzling global economy seems unlikely. Unless the economy of the future becomes less oil dependent, the price cycle surely will repeat itself. The old economy required increasing oil production in order to grow. Ever-increasing oil supplies are beginning to look like a thing of the past, however. After nearly 150 years of growth, the old oil economy may have reached its limit. We are unlikely to find out in 2009, however. Few economists are predicting an end to the global recession any time soon. Absent a rapid turn-around, global crude oil supplies in the coming year should be adequate to keep prices low. The question is what happens thereafter. Attempts to rebuild the old oil-based economy are futile. Sustained economic growth in the future appears possible only if it requires less crude oil than we\u2019ve become accustomed to burning. Despite current low oil prices, the infrastructure investments touted by President-elect Obama and other world leaders must significantly decrease the amount of oil needed for prosperity.