Solution to energy prices? Destroy the economy!

On the surface, it seems so counterintuitive - everything is going in the crapper right now, but oil/gas prices are plummeting? Wasn't it just a few months ago when the high cost of oil was the biggest threat to the world economy? And now, take a look at the price of oil over the last year (courtesy of NYTimes.com):



Oil is trading at roughly $20 a barrel less than it did a year ago after topping $140/barrel in July. Wow, so this is telling me that the value of oil has dropped by half in 3 months??

I look at this and it just strikes me as one more example of why the markets (ALL the markets, it seems) are, to put it bluntly, completely fucked up. The whole process just leads to overreaction, overspeculation, panic. "OMG, we're using oil! It's going to cost more, so bet that it will cost even more than that!"

Fast forward 3 months - "OMFG, everyone's broke, so less oil is being used, now I'm even more screwed because I locked in my price for winter oil in July and now it's half that price. I'm such an idiot!"

It just seems like there needs to be a better way to do all of this, even though I have no clue what that might be. Markets absolutely need to be able to react to changes in the conditions, but can't something be done to avoid or prevent these wild swings? If you look at that graph, there was pretty stable price point for oil around $90-100 or so. And at both the high in July and the low now, I'd bet that the "actual" worth of oil is still somewhere around that point of stability, though possibly slightly lower now that we're looking at decreased demand as the economy crumbles. It's just ludicrous to me that oil is trading so low now, even though that "decreased demand" is still going to be 10-20% higher than the demand in 2007 (instead of the 25-40% increase being projected in July that pushed prices through the roof).