With the front-month contract for light, sweet crude at $87.81 today, oil has fallen over 40% from its high last July.  In other words, this oil bubble seems to have popped, providing vindication for those analysts who said that the rapid rise in oil prices was unsustainable.  It also made fools of those who had forgotten or ignored what happened after a similar price spike in the early 1980s.

The drop is bittersweet.  On one hand, it eases the pressure on the budgets for low- and middle-income families around the country.  As a grad student, I certainly have felt the impact on my wallet.

On the other hand, it reduces the drive to find alternative energy sources by eliminating much of the economic motivation.  It means less money will be spent on mass transit.  It means consumers will be less likely to buy efficient vehicles.  It means that industrial companies will feel less pain from having production facilities overseas (which incur high shipping costs), and thus it means that one more salve for the atrophy of America’s industrial might will be removed.

Cheap oil cannot last forever; some day, it will be so expensive as to no longer be a viable source of energy.  By having that day of reckoning pushed back, we have been deprived of an opportunity to lead the charge towards alternatives.  Somebody, somewhere, someday will solve those problems, but those of us living with cheap oil will not have the chance.