Oil cost over $147 just three months ago. Now it is under $70. How low can oil go? How low should you want oil to go?

It should go much lower but don’t be too quick to rejoice. If prices fall further, the vast oil sands of Canada would become uneconomical. The tens of billions of barrels of oil lying under the deep waters of Brazil and elsewhere would cost too much to produce.

Oil first went down on weakening demand in the U.S. Then when it became apparent that de-coupling was a load of crap and our economic problems had spread to Europe, oil went down even more. Those were the first two legs. We have one more major leg to go.

Oil should fall another $10-20 per barrel as the global slowdown infects the fastest growing countries in the world. Those are countries in the developing world – countries like China, India, Brazil and Argentina. They’ve just begun to grapple with much slower economic growth.

In response oil producers are cutting back production. When they met last week in Vienna in an emergency session, they decided to cut back crude output by 1.5 million barrels per day. But I doubt that OPEC can put a floor under the price of oil. They failed to do it in the 1990’s. Too many OPEC countries didn’t like the idea of seeing shrinking revenues go down even further from lower production.

Will it be different this time around? Venezuela is a big spender. So is Iran. And then you have non-OPEC countries like Russia that are desperate to put more cash in their coffers. How long can they play this game? A few months won’t be a problem. But the global economic crisis will last longer than a few months … at which point we’re sure to start seeing cracks in OPEC’s united front.

Ten dollars a barrel? Sounds good. But it would not only signify an ineffectual oil cartel. It would also mean that the world is in a long and deep recession. And it would be setting up the biggest oil shortage yet once economies start turning around.

Call me crazy but I like where the price of oil is right now. In this case lower isn’t better.

Source: The Next Great Oil Shortage Begins Now

The plan would target profit from the biggest oil companies by taxing each barrel of oil costing more than $80, according to a fact sheet on the proposal. The tax would help pay for a $1,000 tax cut for working families, an expansion of the earned- income tax credit and assistance for people who can’t afford their energy bills.

The real question for Obama, should he end up in office, is: Where is America going to get its oil from?

“OPEC simply won’t raise output, the non-OPEC producers simply can’t,” says Profit Watch editor Manraaj Singh,

“Right now, the non-OPEC countries produce about 60% of global oil supply – about 50 million barrels a day. But they’re stuck there. In fact production is falling quickly in some of the biggest of them.

“Norway’s output has fallen by 25% from its peak in 2001. British output has slumped by 43% in eight years. In America, the giant Prudhoe Bay field in Alaska has seen output drop by 65% from its peak two decades ago…

“And in Mexico, production at the giant Cantarell oil field is collapsing and they haven’t found any new fields to replace it. But Mexico’s economy is growing rapidly. So, domestic consumption is shooting up while production is falling. Mexico’s exports could be wiped-out within five years. That means more sleepless nights for America’s leaders because Mexico is the second-biggest oil exporter to the US.

“Then there’s Russia… the biggest contributor to the growth in global energy supplies over the last decade. Output shot up from about 6 million barrels in 1996 to about 10 million barrels per day today. But the Russians say that they’ve hit peak production… so it’s all down hill from here.”