Well one of the key reasons for the oil price drop was a release of 60m barrels of oil to the market over a 1 month period, this is in response to continuing disruption of oil supplies from Libya. Also in my opinion it's also to counter the inflation mega-trend that has ensued from the mass money printing from global central banks. This inflation occurs because banks borrow money from their central banks at currently < 0.5%, they then invest in higher yielding assets such as commodities (oil), government bonds ad shares / stocks, hedge funds are also key players in the oil market. This in turn drives prices up in all asset classes, helped by easy money policies getting out of control. The Libyan war just added more momentum to the ever increasing oil price. One thing you must remember, governments and central bank love bubbles.
The IEA will monitor the situation and release more oil accordingly, a large portion of this oil is coming from USA oil reserves, total reserves are approximately 146 days, way above requirements. These reserves have been built up in part to inflate the prices and cream off the taxes. Of course this release can't happen indefinitely and may just kick the double dip down the road, another favourite game of the mandarins and bankers.
Barrons believes oil is heading back to $150 in 2012 and that the toll on economies will be lower than in 1980. It believes this due to a larger share of America's gross domestic product comes from services rather than goods. In my opinion this will create a double dip because service usage will drop due to more cash being spent on car travel / goods and peoples perception will be loss of wealth.
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