In the energy market Friday, the bottom fell out, with crude for November delivery crashing to a fresh one-year low, closing at $77.70/barrel, down $8.89. November reformulated gasoline plunged 22 cents, to $1.807/gallon.

Here as elsewhere, panic was the operative term. “The question of the day is, which can drop faster, oil prices or the economic outlook?” wrote James Williams, of WTRG Economics.

“Despite the announcement that OPEC would hold an emergency meeting next month — at which they will certainly announce a reduction in quotas — oil continues to trade on the economic outlook,” Williams added.

And for now, “of all the forces that control activity in financial markets, one of the most powerful is currently at work: perception, the focus of which is demand,” wrote Michael Fitzpatrick, of MF Global (NYSE:MF). “Fear coursing throughout the markets is producing a conclusion that the world is in, or very shortly will be in, a severe and long-lasting recession.”

Williams believes OPEC will try to defend $80, but notes that a “million barrel per day cut would probably not be sufficient to stem the fall,” because “the lesson of the last 30 years is that recessions trump production cuts.”

Source: Crude Plummets Below $80