Econopundit has an amazing chart of historical oil inventories here:
Apparently oil inventories aren't too far off from their all-time high, and this inventory could take 2 or 3 years to work off. If the high inventories aren't caused by a slow economy, just imagine what a 2 or 3 year glut of energy supply could do for the economy and the stock market. It's interesting that now OPEC members are seeking to reduce production. I think that OPEC learned a valuable lesson from the past years' energy price spikes. That lesson is that oil can stay above 50 bucks or so, without causing the world economy to collapse and immediately cause a drop in demand which lowers prices. Just a few years ago who would have thought that oil could hit 70 without starting a recession?
Now I know almost nothing about the global politics or macro-economics, so I'm going to engage in some wild speculation and assume some facts where I have no idea if they are really true or not. I wonder if the parts of OPEC that are pushing for production cuts might be primarily those dominated by Venezuela and Iran. Iran and Venezuela's reserves are declining, while at the same time due to mismanagement, their ability to find and extract new reserves is almost non-existent. They both need money very much in the short-term to maintain their regimes. Iran needs money for it's military build-up and to pay for the Hezbollah/Lebanon fiasco. Chavez needs a constant flow of money to give away as hand-outs to the poor and to pay off his cronies in order to maintain his power. These major oil producers need oil to stay high in the short term as they need cash-flow right now.
On the other hand you have nations like Saudi Arabia, Kuwait, and Dubai who have lots of oil, plus advanced oil exploration capabilities thanks to their partnerships with western corporations. These countries are basically financially sound at 25 dollar oil or at 50 dollar oil. Although 50 dollar oil doesn't cause the global economy to collapse it does make a lot of exploration, alternative energy, and conservation economical that wouldn't be at even 30 dollar oil. I wonder if these OPEC members would prefer if oil were lower. Over time 50 dollar oil is going to reduce their power in the global market as substitutes are found in the rest of the world. Since these nations probably have more marginal supply than the likes of Iran and Venezuela they probably hold enough production power to influence the price of oil moreso than Iran and Venezuela.
Although I generally think conspiracy theories about various "evil factions" manipulating the price of oil to influence the US economy and Elections are stupid....I'm going to indulge and be stupid anyway....forgive me: It seems to me that the leaders of the Sunni nations such as Saudi Arabia, Kuwait, and Dubai would prefer that the US have a strong military presence in the Middle East, despite what they might say publicly. We are the only thing standing between them and the Shiites in Iran and Iraq now that Saddam Hussein is gone. They need us there to keep the Shiites contained.
The leaders of Saudi Arabia, Kuwait, and Dubai must know that the Democratic leadership in Congress favors withdrawing from Iraq and appeasement of Iran, so I wonder if they might be pushing oil prices down in order to encourage a Republican victory in the '06 elections? If anyone really has the ability to manipulate the global oil markets in such a way, it would be these guys who could actually pull it off.