Remember oil?

You don’t have to over-stretch your memory. Just rewind a little bit, a few months, to those halcyon days when many people earnestly believed that the global financial crisis would, with a little luck, remain a largely US phenomenon.

That Pollyannish take on the world’s financial system has since gone up in smoke with the collapse of Wall Street as we know it and the spreading of the American contagion to Europe – with interest.

One upshot of the convulsion is that while most of us were looking the other way – poring over the fine print of the biggest bailout in history – commodities have been tumbling back down to Earth from their skyscraping recent peaks.

Suddenly, all that of $200 a barrel oil that passed for gospel as recently as the summer seems naively overblown. Oil is still dear, but the incredibly slowing global economy is likely to crimp demand and keep a lid on another runaway price explosion.

 13% single-week drop

Crude oil fell by almost five dollars on Thursday on the New York Mercantile Exchange. It's now trading just over $93, marking a 13% single-week drop - and a dramatic decline from its record peak above $147 set back in mid-July.

It's all part of a broader trend dragging on the entire commodities sector – from gold to copper to wheat to platinum. The nagging fear is that demand for commodities will weaken seriously as the global economy slows or seizes up.

Whereas before, the US was on the skids, taking the worst blows from the subprime backlash, now the slowdown has gone global. Economies across Europe - including France - are either in, or on the brink of, recession.

The new reality is reflected in currency movements as well. The dollar is at a 13-month high against the euro precisely because many people now feel the US economy may fare better in the end than Europe's. A stronger dollar tends to push commodities down by robbing them of their appeal as safe haven investments.

According to Bloomberg, the main commodities gauge, the CRB index of 19 leading raw materials, has dropped 10% this week; that's the steepest decline since 1956. Crude oil, meanwhile, is about to see its worst weekly performance since 1956, Bloomberg reports.

These losses are dragging on the stock values of big miners and gold producers such as Rio Tinto and Newcrest Mining, and commodities dealers such as Mitsubishi Corp.

Troubled auto industry driving demand down

Exacerbating the commodities wind-down are the troubles weighing on the auto industry. With many automakers in crisis mode, their demand for key commodities such as rubber for tires or the platinum used in catalytic converters is easing, along with aluminum.

Most US automakers reported a 30% decline in sales in September from a year earlier.

Nor are the automakers themselves feeling the benefits, at least for the time being, of the lower prices. This is because they purchase their materials on long-term contract, which means the higher prices of a few months ago are still locked in.

That said, the IMF says it is too early to declare an end to the days of high commodity prices. The organization cautions that inflation pressures persist, supplies for natural resources remain tight and demand from emerging economies remains solid.

It is probably safe to say that the era of cheap oil is definitively over. But you can still enjoy some cheaper oil while it lasts.