What happens when the demand for oil flattens out or falls and the supply of oil continues as before or actually increases? The answer is economics at its simplest — the price plummets. And that indeed is what has occurred.

All around the world the demand for "black gold" has eased. As oil tankers lie offshore with cargoes unsold, inventories rising and stocks accumulating, American and European oil consumption, and imports, have actually fallen. It is reported that even China, with its recent vast oil thirst, now finds itself overstocked and is trying to ship surpluses back to Europe for resale.

Attempted cutbacks by the Organization of Petroleum Exporting Countries have made little impact. In a matter of months the price of crude oil has more than halved and is still sinking. Of course, all this is in the very short term. What happens next, in the medium term, as reactions to this collapse begin to take hold?

Again, simple …