I was thinking about Oil a lot lately (who hasn't?) and had read somewhere that the higher prices of Oil are going to change many things, but most of those changes sounded rightfully negative with Paul Krugman The world gets bigger putting forward that higher fuel prices are putting the brakes on globalization: if it costs more to ship stuff, there will be less long distance travel and shipping.

On the other hand, Vint Cerf: High Oil Prices Could Help the Web because it will spur the development of Web 2.0 and Virtual Worlds:

"We may turn increasingly to video conferencing or other kinds of electronic media in order to avoid having to travel."

"…So how does that help the web? More home workers, means a larger market for applications designed to help remote workers collaborate. Things like Google Docs, Basecamp, Dimdim, and PalBee will all benefit from a larger contingent of home workers."

Maybe, we'll also, finally, stop looking at more drilling for Oil as the answer, even short term (especially for the short term, it's not the answer since nothing done now would really kick in for a few years - but it would be just a trickle.

But the real reason - the must fundamental reason, why we need to move away from Oil as energy source is the instability it introduces into the World Economy - which Krugman deals with in a post titled Embedded vs. non-embedded inflation

"…Imagine that there are two entrepreneurs, Harry and Louise, both of whom change prices only at fairly long intervals — say, once a year. Other things equal, Harry want his average price over the next year to be about the same as Louise’s; Louise wants her average price to be about the same as Harry’s. But their price setting takes place on different dates. (This is a metaphor for the real economy, in which people setting prices have to think about the prices of many competitors and suppliers that will prevail until they revise the price again.)

In this situation, inflation can feed on itself: Harry raises his price above Louise’s, because he expects her to raise her price in the future, and she does the same thing when it’s her turn. It looks like this, with Harry in red and Louise in blue.

Once expectations of inflation get embedded like this, it’s hard to get price stability back. In practice, what happens is that central banks deliberately cause a recession. This makes Harry shave his price increases a bit, and then Louise does the same, and over time both start to notice that the other’s price increase keeps falling short of expectations, and eventually inflationary momentum gets wrung out of the system — but at a high cost. In the 1980s, it took double-digit unemployment to get rid of the embedded inflation from the 1970s.

But how is this relevant to current events? Well, the problem of embedded inflation applies only to prices that are set at fairly long intervals — especially to wages, which are usually set only once a year. There’s no comparable problem with commodities like wheat or oil, where the price changes minute by minute, and goes down as easily as it goes up. It may sound perverse, but embedded, hard-to-reverse inflation is only a problem for parts of the economy with relatively sticky prices."

And then, any time there's hostility around an Oil Field, like there was today Stocks Down on Bank Woes and Oil Price Increase the price of oil spikes up by 5 to 10 dollars a barrel - usually it drops down again - but imagine what would happen if a tactical strike on an a large oil field succeeds?

Can you imagine what will happen if Iran gets invaded - or there's more instability in the Middle East?   Think $200, maybe $250 dollars per barrel of oil.

We have to get away from Oil - there's no turning back - things will never be cheap again, until we move towards another energy source - hopefully one that does not pollute the planet like Oil does.