To be able to drop the price of oil so dramatically within such a small time-frame, required either the discovery of  massive new oil reserves in the Saudi Arabian region (which there were none) or some clever cooking of the oil reserve books...

The latter was the case and the method became very favorable amongst other OPEC nations as well.

In a 1998 report, the International Energy Agency (IEA) finally admitted to knowing about some of OPEC's wizards cooking their books.

Not only were oil nations lying about their oil reserves but major oil corporations were found guilty of using the same deceiptful practises.

Just recently European oil giant "Shell" had to pay $352.6m (£178.3m) to settle investors' claims that Shell had overbooked its oil and gas reserves by 20%.

"For five years, from 1998 to 2003, Shell Oil had repeatedly misled shareholders over its oil and gas reserves.

So with Oil nations and Oil producers lying about the actual amount oil that the were producing or actively discovering, the analysts began to wonder...

Most experts agree that 'Peak Oil' (the point in time at which the maximum global petroleum production rate is reached) will arrive somewhere between 2010-2015.

In practical and considerably oversimplified terms, this means that if 2005 was the year of global Peak Oil, worldwide oil production in the year 2030 will be the same as it was in 1980. However, the world’s population in 2030 will be both much larger (approximately twice) and much more industrialized (oil-dependent) than it was in 1980. Consequently, worldwide demand for oil will outpace worldwide production of oil by a significant margin. As a result, the price will skyrocket, oil-dependent economies will crumble, and resource wars will explode

 

So what does this mean to you and me and the cat up the tree?
Well, in short, Everything!

Look around you. Everything you see was either manufactured with, inspired by, or as a direct result of the use of oil and petroleum as a means of powering our massive energy demands.

"Without oil as the driving force there would be: No electricity, no flashlights, no plastic, no cars, no telephones, no Starbucks, no sneakers, no health clubs, no computers, no supermarkets (except to sell the wooden products they’ve made), no cell phones..." 
 Source: 'The Truth About Oil' by Energy & Capital  /  download PDF  "The Truth About Oil"

As US President Bush stated in his 2006 State of the Union Address, “We are addicted to oil.”...