The component of the price of oil due to speculation was always kind of an unknown quantity. At the height of the oil bubble this summer, with prices at $150, someone suggested to Congress that up to a third of the price was actually due to market manipulation (a.k.a. “speculation”) by financial institutions, many of whom were looking for some quick cash after the housing bubble had collapsed.

Now oil is below the OPEC target price of $100 a barrel—so it looks like those speculation estimates were right on the money. (As my radio fans know, I called $100 as the baseline for the future, so I wasn’t too far off.) Even the destruction of a Nigerian pipeline and hurricane season aren’t buffetting crude prices, which is how you know there are much more powerful forces at work. The American financial system is in turmoil.

The ‘invisible hand of the market,’ if you will, is punching its way to the top of global financial institutions. And to offset their giant losses and acquisition costs, we’re seeing these banks and brokerage houses and hedge funds liquidate their oil holdings.

What OPEC and those ‘foreign oil’ producing countries fear the most is “demand destruction,” which is what happens when consumers at the top of the consumption curve start buying less. Even though global trends for oil consumption keep increasing, the greatest increases are in developing countries. (Interestingly enough, of the BRIC economies, Brazil and Russia are successfully developing their own domestic energy supplies, Brazil with ethanol and Russia with oil and natural gas. The real future for oil is in countries like India and China.)

The global average oil consumption is about 4 barrels of oil per person per year. But the American average is 24 barrels per person-year. We’re not just on the far side of the curve, we’re near a global maximum. There are other countries which have a greater per-person consumption of gasoline, but most of them achieve the numbers by using gasoline for power consumption, something the U.S. has largely stopped.

What OPEC is afraid of is America becoming more fuel efficient. “Properly-inflated tires,” that old liberal hobgoblin, would, , be the equivalent of finding an oil field bigger than Alaska’s Prudhoe Bay. A 1% decrease in our daily demand would be like canceling out the entire production of Bahrain.

Those who complain about the leverage that OPEC and “foreign oil” have over the American economy don’t seem to realize that it goes both ways—we have plenty of leverage over global oil prices, and most dramatically, when it concerns reducing our disproportionate use. Our economy, and thus the world economy, is based on the assumption that everything will keep expanding. When things contract, the works get gummed up.

Speaking of I-told-you-so’s, McCain’s new running mate is pro-ANWR drilling, so as I predicted previously, Sarah “drill, baby, drill” Palin can be counted on to temper his position against it. The whole phenomenon of off-shore drilling expansion and the politics around make my head hurt.

Polls indicate that a large majority of Americans are for off-shore drilling, if it means lower prices at the pump. Republicans need you to forget the caveat there, because as we all know, it won’t help. Look at, for example, gas prices today, which are at near-record highs even as oil hits a one-year low.

It’s the math, stupid:

America consumes 20.7 million barrels a day.
America produces 8.3 million barrels a day.
How many countries does America need to invade to get off foreign oil?

Likely targets include:

a) Saudi Arabia (10.7 million barrels a day),
b) Russia (9.7 million),
c) Iran (4.1 million),
d) China (3.8 million),
e) Mexico (3.7 million), or
f) Canada (3.3 million).

Pencils down.