Things happen quickly these days. It was about a year ago that I wrote to my Foolish friends about the daunting prospect of oil rising to $100. That was also little more than six months before the price topped out in July at $147 a barrel.

During that time, natural gas prices had begun to follow their crude brethren northward, propelling the likes of Chesapeake (NYSE:CHK), Devon (NYSE:DVN) and XTO (NYSE:XTO) on a steep climb upward. In the process, there arose all sorts of excitement about the possibilities for unconventional gas plays such as the Barnett Shale in North Texas, the Haynesville Shale on the Texas-Louisiana-Arkansas border, and Canada's Montney Shale in British Columbia.

The world today looks dramatically different. Crude prices are down 70% from their highs, and with commodities prices and the global credit crunch working in tandem, the domestic independents are scratching for development funds. As a result, energy investment attention has refocused on the big guys, like ExxonMobil (NYSE:XOM), Chevron (NYSE:CVX), and ConocoPhillips (NYSE:COP).

At this point, I can't tell you whether crude will be at $30, $80, or even $200 a barrel in, say, 18 months. Indeed, lots of observers thought the run-up in the first half of this year would continue, perhaps touching $200 in the near term. Conversely, it's easy to forget that a decade ago, in 1998, the average inflation adjusted price of oil barely topped $15.

So oil and gas clearly haven't shed their cyclicality. As such, it'd be wise for Fools to keep a few things in mind:

  • OPEC is something of a mixed bag. Kingpin Saudi Arabia is able to get by on far lower prices than, say, Iran and Venezuela. Nevertheless, the group will meet next week in a session that probably will involve another production cut.
  • Russia is more and more teaming up with the cartel, together accounting for about half the world's production. The country also needs higher oil prices for economic stability.
  • With a number of global oil and gas projects -- especially expensive Canadian oil sands efforts -- on hold in the face of deteriorating commodities prices, I'm betting that slowing production will cause prices to reverse themselves sooner than generally is expected.

So the world of energy remains chaotic. One thing I'm certain of, however, is that Foolish portfolios should include representation in the sector. My favorites among the members of Big Oil, which I think currently makes the most sense, are ExxonMobil, with its flush balance sheet, including over $38 billion in cash and short term investments, and BP (NYSE:BP), which has overcome a number of difficulties during the past couple of years and will start you off with a 7.70% dividend yield.

More oily and crude Foolishness:

ChesapeakeEnergy is a Motley Fool Inside Value recommendation. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor David Lee Smith does own shares in XTO, but not in the other companies mentioned. He does welcome your questions or comments. The Fool has a disclosure policy.