Please expand a bit on how the supply of oil from oil producing countries like Venezuela and the Mid-east, combined with the rising demand from countries like China are outweighed by "politics

Well, the simplest scenario goes something like this:
OPEC (read: Saudi Arabia - who happen to be huge Bush fans - are in charge of assigning each country's production quotas) has allowed overproduction to ride into the usual Fall price decline(1* 2*) just in time to drop the price of gasoline for the upcoming elections. To be sure there are many factors out of the Saudi's control, but they moreso than any other factor, largely determine the price of oil. It's not unreasonable to assume that they'd allow a short-term spike in supply and the corresponding price drop to occur if it would help Bush and GOP.
Many would argue that it's vastly more complicated than that, and perhaps they're right. But I still think that the Saudis have enough sway to give Bush a boost.

The first link below is one you should enjoy. It's got a ton of analysis and theories that delve into all the factors. Most of the comments there are pretty good, too.

1*Prices have fallen from their risk-induced high of $78/barrel (Israeli/Hezbollah war) to just above $63/barrel as of this writing. A quick glimpse at Figure 2 reveals that after the risk-induced high (hurricanes) of $70/barrel in 2005, prices subsequently fell to about $57/barrel. In 2004, prices reached $55/barrel in late summer before falling to about $42/barrel in October. However, the current drop of about $15/barrel exceeds both prior years by $2/barrel--and October isn't here yet.

2*So why are gasoline prices coming down so dramatically? There are important seasonal factors in U.S. gasoline prices, which are higher in the summer due to summer fuel requirements and greater gasoline demand. Everyone always seems as shocked when prices go up in the spring as when they come down in the fall, even though to some extent that same pattern is repeated every year. However, much more than just the usual seasonal is in operation this fall. The drop in crude oil prices, down $14/barrel over the last month, has now become the dominating factor.

Somewhere in my soul, there's always Rock -n- Roll... Joe Strummer

I like the European approach of taxing gas at the pumps, such that the price is like twice what it is in North America. That keeps the cars small, and encourages public transit.

While this sounds good coming from a common sense perspective, you have to keep in mind that public transportation is not the silver bullet for American transportation woes that it is in Europe. The largest west-European nation is at best the size of California, urban centers are more densely populated and they don't exactly have the same Middle-America diaspora that makes up much of the population of America. Try living anywhere in the rural south and imagine trying to get around without a car (even if it didn't seem like the public transportation was being sabotaged by local governments), you'll find that urban centers are much more spread out. If you've ever visited California's central valley, which is one of the largest population centers in the US, you'll find that it's spread out over several-hundred square miles of strip malls and assorted crap. Once again an example of a place not well-served by public transportation.

As a disclaimer, I say this as someone who, growing in the Puget Sound (which has an excellent public transportation infrastructure), literally grew up with a bus pass that I used daily to get around. I just don't think it's a cure-all country-wide.

I don't imagine we'd see the same solution applied to Russia, China or India.

I honestly won't even touch the taxation part of your comment. I can imagine Nascar-men of the land rising up en masse in a tax revolt, especially when it's modeled on the high-falutin euro-faggotry liberalism we've so come to despise and denounce in this decade as "un-American"

I like the European approach of taxing gas at the pumps, such that the price is like twice what it is in North America. That keeps the cars small, and encourages public transit.

Your "one size fits all" theory for human transportation regardless of world geopraphy intrigues me and I would like to subscribe to your newsletter. Please tell me more about how small cars in europe would be effective in snow passes of Colorado or the farming states of Idaho, or how public mass transit would be suitable in areas where the average commute to the supermarket is a 15min car ride.

I propose we collect all the sparsely distributed people living in "flyover country" and perhaps create "camps" where they could be "concentrated". This way the citizenry could be easily taxed and thus alternative energy sources would appear. Also this would create room to bring back the wooly mammoth and large mega fauna.

Naturally abberant cities like Hong Kong where petrol costs 4x as much as in the US but have little effect on the prolific number and types of vehicles should be ignored. After all..Europe clearly knows whats best and is the prospective source of innovation for the world over the next century.

Memory is a strange bell, jubilee and knell.