Oil Drops to Below $70 a Barrel--Chavez and Ahmadinejad Caught Crying Into Fistfuls of Cash

Just a few months ago, people were warning of $400 a barrel for oil. (I recall that CNN had a fear-inducing headline one day on this topic, but I'm unable to find the reference.) Earlier, people also quoted the same number and declared that the world was out of oil and that the price would never go down.

Today oil fell to $69.85 a barrel.

Crude oil fell below $70 a barrel to the lowest since June 2007 and gasoline tumbled after a U.S. government report showed stockpiles increased more than twice as much as forecast.

Supplies rose 5.6 million barrels to 308.2 million barrels last week, the Department of Energy said in a weekly report. Oil also fell on doubts that the bank rescue plan will bolster global economic growth and fuel use. OPEC brought forward its planned meeting from next month to Oct. 24 after the oil price drop.

I posted previously on how Venezuela and Iran would suffer economic consequences if oil dropped below $75 a barrel. One can only hope.

How low will oil go? Not much lower, if OPEC can help it.

OPEC will likely cut oil output by 1 million barrels a day at next week's meeting to check the drop in prices, Qatari Oil Minister Abdullah al-Attiyah said.

"It will be one million, or more," he told Qatar's al- Jazeera television channel. "Prices have fallen a lot and we need to take measures."

It will be interesting to see how much pressure OPEC is willing to risk on a delicate world economy. On one hand, they want to milk the rest of the world for as much money as possible for the oil they have left. On the other hand, driving prices north of $100 has two consequences. One, It hurts economic productivity, which lowers the demand for oil. Two, it drives nations to develop alternative energy sources with a high priority--something OPEC desperately doesn't want to see happen.