The drop in oil has been nearly monumental since the start of May. The global slowdown is hurting oil far more than the geopolitical risks are helping oil. Crude Oil is down over 4% or $3.29 to $78.16 for current NYMEX WTI Crude. This is the lowest price since what appears to be going back to October.

With an Iran oil embargo almost certain now, most investors would just assume that the price of oil was going to shoot through the roof. The slowing growth in the BRIC nations and the outright recession in Europe is just overwhelming all of the oil bulls. When a market is sinking at a time the headlines would make you think that it should be rising, it means larger forces are at work.

The good news is that this is going to act as a gift to the consumer. Driving will be cheaper, and that frees up more spending for consumers. It also drives down the price of airline tickets.

To show just how bad this drop was, the United States Oil (AMEX: USO) product closed down 3.4% at $29.45 and it only has to trade under $29.10 for this to hit a 52-week low.

Oil sliced through the $80.00 price like it was soft butter. The price did bounce off of $80 late in the morning but that only held for about an hour and then things went from bad to worse.

If oil went through a key psychological level of $80 that fast and if investors and traders are running for the hills, then it is not too much of a shock to say that oil may head toward $70 per barrel at some point soon. We would note that the lows seen last October are very near and that sets oil up to be challenging the 52-week low. The lows of 2010 were actually down closer to $77 per barrel. If that price does not hold, then something more ominous may be underway and $70 might become much more possible.

Market Vectors Oil Services ETF (AMEX: OIH) closed down almost 5% lower at $34.24 on the day and its 52-week low is $33.57.

JON C. OGG

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