The price drop just proves that the price was inflated by predictions that demand would keep increasing, keeping *future* prices climbing as buyers were forced to bid for an uncertain supply. But as soon as the first signs of global economic slowdown hit, prices dropped over 30% (from 150ish to around 100), and continued to drop as the economic crisis was confirmed. Has *actual* current demand dropped 50%? Heck no. But an economic slowdown means that future demand is not expected to climb beyond supply increases, resulting in the price of oil plummeting to a more realistic balance between *current* supply and demand.
CNN.com has a few articles up right now discussing this. There is some speculation that there is a balance point around $70, but a strengthening dollar and the potential for both continued economic depression and increased US oil production capability (not actual increased production, but the potential for increased production) could drive oil prices below $20 in a worst-case situation.
Why is this worst case? CNN points out that the budgets of several major oil countries have budgets that rely on the price of oil remaining high - as high as $95/bbl in some countries with hard to get oil and few other economic products. Those countries will be hit hard, and that's why OPEC is seriously talking about cutting production. The thing is, the price was supported by speculation on future demand just as much as on actual demand, so cutting oil to support continued concern about oil supply will only encourage other nations to look for other energy sources. The US is already on it's way to reducing vulnerability to foreign oil production levels. We'll probably always need energy from other countries, but the price fluctuations from supply/demand uncertainty should decrease with every single additional oil field we open, every refinery we open, and every increase in cost-competitive alternate energy production.
