Oil prices fell to their lowest point since May 2007 Friday after the world's largest oil cartel slashed production targets by a smaller-than-expected amount.
The Organization of Petroleum Exporting Countries, whose member nations control about 40% of the world's oil, said it would cut production by 1.5 million barrels a day starting in November.
U.S. crude for December delivery fell $4.79 to $63.05 a barrel in electronic trading. Oil hit a low of $62.95 after the news of the cut broke at about 5:10 a.m. ET. It was the lowest level for oil prices in more than 17 months.
If oil sinks below $50, OPEC will be forced to act and cut production again.
Regular gas in Atlanta is approaching $2.50/gallon [see chart].
It's good to see gas prices get back to something reasonable, but it's taking a global recession to make it happen, which is not good.
Hopefully, people will continue their reduced gas consumption, even as the cost of gas goes down, and even after the economy recovers.
Cutting production to increase the price is a two-edged sword for oil producing countries. It reminds me of GT's AD reducing the seating at Grant Field back in the 80s, under the theory that would increase demand for the remaining seats. The only problem was the total revenue went down.