At the very least, a correction back to minor support around $100 is expected, while a further drop to more significant support around $80-78 is probable.  Even a much deeper plunge is possible depending on how rapidly the world economy deteriorates during this global real estate crash.

 

A larger fall in the oil price should probably not be taken to mean that there was no shortage of oil production, that oil prices mainly went up based on speculation, and that investments in alternative energy are not as urgently needed after all; more likely, a large and sustained drop in oil prices below the $80 area would only indicate that the world economy is headed for a severe recession (or a depression), and that the collapse is leading to oil demand temporarily falling well below current world oil production capacity.  In other words, a situation of temporary oversupply.  The trigger for the growing economic and financial crisis was likely - at least in part - the skyrocketing energy prices that have driven up production costs for almost anything one can imagine (fertilizer, food, plastic products, mined metals, etc.), as well as vastly increasing transportation costs.

 

During the past three years of record oil price increases, worldwide production of conventional crude oil has been unable rise above the 2005 level.  In other words, while oil producers had the highest price incentive ever seen, they were unable to produce any additional barrels of oil.  What this most likely indicates is that world oil production likely is at or near its peak, and that a long-term (probably) permanent decline in oil production is coming within the next few years regardless of whether there is a global recession.  Even if the world is in a depression and oil demand settles at a significantly lower level, the worldwide capacity for oil production is likely to shrink to meet that reduced demand level, again sending prices skyward, stifling any nascent economic recovery attempt.

 

If we wish to avoid potentially catastrophic future energy shortages, it is vital to dramatically increase investment in solar, wind, energy efficiency, battery technology, etc., even if energy prices fall lower than most might be expecting.  That drop in energy costs will - unfortunately - very likely lessen the sense of urgency, and lead most people (including politicians) to shift their focus away from energy issues, making future energy supply problems even more severe, elevating the potential for geopolitical conflict.