We've discussed many of these issues here in the blog... but a good comprehensive review in 1 story can be found in today's AP story. Oil has finally hit the point where its turned into an exorbitant tax on all things in the global economy. As the consumer of 25% of the world's energy (with 5% of the population) this is one matter when American habits do still have a major effect. Consumers are burrowing into their homes (who ever heard of the term staycatation until about a month ago? Now I hear about it daily) - $4 gas literally forces certain parts of US population to be hostage to their homes or surrounding neighborhoods.

• Oil prices dropped below $124 a barrel Wednesday and after Federal Reserve Chairman Ben Bernanke signaled that inflation had become a more prominent concern. "The stars for a significant correction in crude oil are lining up," U.S. analyst and trader Stephen Schork said in a research note.
• The Organization for Economic Cooperation and Development forecast several quarters of weak growth for most of its 30 members, which include the U.S., Japan, and several European countries, and on Wednesday cut its economic growth outlook through next year.
• Evidence continues to mount that oil prices, nearly twice what they were a year ago, have finally cut into demand.
• The latest MasterCard SpendingPulse survey found that demand for gasoline in the U.S., by far the world's biggest oil consumer, fell by 4.7 percent last week -- which included the long Memorial Day holiday weekend -- compared to the same week last year. Averaged over the last four weeks, demand fell 6 percent last week.
• The decision by some countries in Asia to lower subsidies on oil products also was seen as having a bearish effect on the market. On Wednesday, India and Malaysia joined a growing list of countries which are raising prices for fuels ranging from gasoline to cooking gas. (we started discussing this 2 weeks ago when oil was spiking, as a major risk factor)
• India announced increases which would boost gasoline prices in New Delhi, its capital, by 11 percent. Malaysia said it would hike gasoline prices by 40 percent and electricity for commercial and industrial users by 26 percent.
• Indonesia and Taiwan were among nations recently to take similar steps. (and now demand destruction can begin to happen in these countries, along with all the other Asian entities ex-China)
• "Investors are ... wondering if we've got to the point, with prices around $130 a barrel, if that's too much for consumers to bear," said Rachel Ziemba, an analyst at RGEMonitor.com in New York.

In the end, the problem of high prices is solved by 1 thing: high prices. Demand destruction 101. Now that markets are allowed to be "more free" (most Asian economies are still nowhere near truly free), we will begin to see reality set in. But again, this is a timing issue - demographic growth and industrialization still point to many longer term demand issues - this will be a series of spikes and valleys along an ever upward slope in energy usage. Until alternatives become a meaningful part of the global system (>15%) we should continue to have these problems; and they will be a tax on global growth. I don't see this threshold of alternative energy usage being breached for about a decade or so, based on current information. Hopefully it comes much sooner, so we are not "hostage" to our lack of planning as a nation/globe.