When a stock or commodity price falls or rises, investors immediately succumb to the fear and greed associated with the markets themselves. A similar principal can be found in the volatile oil market. We all have short memories and choose to hope for the best instead of gauging the future by the past.

Adjusted for today's dollar, oil fluctuated throughout the 1940s between $15 and $20 per barrel, and topped out in the 1960s at $25 a barrel. OPEC was established in 1960, which would play a very large role in future oil pricing around the globe. Fast-forward to 1972 when everyone was enjoying prices around $20 a barrel. That is, until the Yom Kippur War started between Israel and Arab states. This war led to the oil embargo of 1973, which immediately drove prices up to the $50, a barrel. These prices continued to soar throughout the 1970s, reaching almost $100 a barrel.

Enter the 1980s and the rise of worldwide terrorism, the assassination attempt of Ronald Reagan, the fall of the Berlin Wall, and oil prices rising as high as $115 a barrel. However during the 1980s, oil prices reflected a roller coaster, dropping to $25, rising to $42, dropping to $27, and then rising again to $40.

The 1990s brought more volatility: the first Gulf War, rises in the stock market as the DOW reached 2500, and oil dropped to $16 a barrel in 1998, then rose to $3 7 a barrel by December of 1999.

The last 15 years have brought more of the same with oil rising to nearly $145 a barrel before dropping quickly to $43 in 2009, then back up to $115 in 2011, and finally down to $26. And you thought oil only got more expensive.

So - how does this affect us?

First, we feel it at the pump. The rise and fall of oil pricing will usually, but not always, be reflected in gas prices. Many of us are now enjoying an additional savings thanks to the money we are saving at the pump.

Most believe that the lower cost of oil will have a positive effect on the global economy. The savings we see at the pump will create opportunities for more discretionary spending in other parts of the economy. On the other hand, most crude-oil-exporting countries are experiencing a tremendous loss of income and pressure on their economies, balancing of their budgets, loss of jobs, and inability to fund government and entitlements. These countries include: Russia, Venezuela, Iran, Saudi Arabia, Iraq, and China. According to a foreign ministry advisor, Russia loses about $2 billion in revenue for every dollar that the price of oil falls. The country's state-owned Sberbank says oil prices need to stay above $104 a barrel for a balanced government budget. Currently, we are nowhere near that level, and some analysts predict we won't reach $104 a barrel for some time. 

So - where can we expect savings, and why do we depend so much on oil anyway?

Well, beyond our entire infrastructure basically running on oil, quite a few everyday items are made from oil:

1.  Cosmetics
2.  Shampoos, conditioners, soaps, hair dyes
3.  Lubricants
4.  Cleaning products
5.  Medicines
6.  Our clothing
7.  Plastics and rubber
8.  Food
9.  Our Tech - Cell phones, computers

We use oil-based products everyday of our lives, not just in our gas tanks. Our dependency is why prices fluctuate and no one can accurately predict the oil market. Remember, the same principal can apply to the stock market. It's always in flux and the best practice is to resist emotional investing by seeking advice from a third party.