Crude oil prices have plunged two- thirds from its record high during the summer, and the likelihood they’ll fall further has caused panic among oil-producing nations and inspired the Organization of Petroleum Exporting Countries (OPEC) to call another meeting this week to discuss possible production cuts.

After blitzing to a record-high $147 a barrel in July, oil last week receded below $50 a barrel, causing a stir among energy companies and oil-producing nations that rely heavily on exports for income. Some analysts predict that oil could fall to $30 or $40 a barrel by early 2009, as so-called “demand destruction” sets in.

The drop in oil demand has been particularly poignant in the United States – the world’s largest oil consumer – where the once-vaunted American consumer is in full retreat. Gas prices soared to $4 a gallon in the summer, forcing many Americans to change their driving habits. However, consumption declines have continued as the U.S. economy has likely entered its steepest recession in more than a decade.

Unemployment is on the rise and the nation’s economic outlook is dismal, if not uncertain. That has kept cost-conscious Americans off the roads, despite a significant drop in fuel prices.

Sign up below… and we’ll send you a new investment report for free: “Credit Crisis Report.”

Even at $2.00 a gallon, gasoline consumption slumped 2.85% in the week ended Nov. 14, compared to that same period in 2007, according to a survey by Master Card Inc. (MA).

The Energy Department estimates that domestic oil consumption will fall by 5.4%, or 1.1 million barrels per day (bpd) – its biggest plunge since 1980.

Stephen Schork, who publishes the widely read Schork Report, is just one of the analysts wondering how long $50 oil will hold.

“Maybe $50 is too conservative given the putrid, putrid look at the economy,” Schork said. “If we’re not out of these doldrums nine months from now, we’re looking at $30 oil.”

Dissention in OPEC Ranks

However shocked analysts, traders, and energy companies may actually be, their surprise pales in comparison to the panic spreading through OPEC, the oil cartel that controls roughly 40% of the world’s total crude production.

While some member nations have sound fiscal budgets equipped to handle oil at such low prices, other nations overspent or built budgets contingent on high oil prices. Countries that rely heavily on petrodollars to finance social programs and infrastructure development need high oil prices to keep trade balances in check.

Venezuela is the OPEC member least able to withstand the current drop in prices, according to a study by PFC Energy, an energy-consulting company. PFC says oil must be at least $94 a barrel to ensure Venezuela’s economic stability and generate enough money to pay for imports.

Saudi Arabia, the cartel’s biggest producer, and Iran, need oil prices to hover around $55 a barrel to maintain a sound fiscal budget. On the other hand, Qatar, which imports just about $15 billion worth of goods a year, and has little government spending, only needs oil to trade at $10 a barrel to keep its trade balance from sliding into the red.

Only Qatar, the United Arab Emirates, and Algeria can balance their external accounts in 2009 with oil prices below $50 a barrel, The Financial Times reported.

With each country facing different needs, dissention has swelled within the OPEC ranks. The group cut production quotas by 1.5 million barrels a day at an “extraordinary” meeting in Vienna earlier last month, but so far the effects have been limited.

Some countries, such as Iran and Venezuela, want to cut production back further, but there are smaller countries that are reluctant to do so.

Nigerian oil minister Odein Ajumogobia said last week that it is not in his country’s interest to cut production because, at such low prices, Nigeria needs high output to balance its budget.

“We are in the process of [calculating] our budget… based on an [oil] benchmark of $45,” Ajumogobia said. “If you cut the volume then it is going to affect your budget, so obviously we are not advocating a cut because it is not in our interest.”

Nigeria currently requires oil prices of $68 per barrel to cover its imports, according to PFC Energy.

OPEC cartel has scheduled a second emergency meeting for Nov. 29 in Cairo, Egypt.  The agenda for the meeting will be to “asses the market situation and collect information from member countries,” Algerian energy minister and OPEC President Chekib Khelil said. “The current price of oil is low, but it can’t remain low always. We believe prices should be between $70 and $90 a barrel.”

However, Khelil does not see the group reaching a decision on production. That will be left until OPEC members hold their December meeting in Oran, Algeria.

“We aren’t likely to take a decision in Cairo,” Khelil said. “In Oran, we will have enough information to make a decision. There we will decide to cut.”

Last 5 posts by Money Morning

• Obama Commits to Free Trade Deal With South Korea, But Auto Trade Remains Sticking Point - November 20th, 2009
• Investment News Briefs - November 20th, 2009
• Hot Stocks: Comcast Looks to Expand Its Brand with Potential NBC Universal Takeover - November 20th, 2009
• Although President Obama Warns of a “Double-Dip” Recession, Money Morning Expects U.S. Recovery to Continue - November 19th, 2009
• Investment News Briefs - November 19th, 2009