After five years of steady prices hikes, the cost of oil fell on Monday.
Brent crude sunk to $67.53 a barrel, the cheapest it has been since October 2009, but later crept up to just above $70 a barrel.
The dramatic drop means the price is now 40% below its peak in June.
The price of oil has fallen by more than a third since the summer.
The lower price is one result of Opec’s decision last week not to reduce output. Its target production remains at 30 million barrels a day, despite a glut now building up.
New sources of oil, such as oil sands in Canada and shale oil boom in the US, have helped increase global supply and reduce prices. Demand has dipped due to stagnation in the eurozone, recession in Japan and a slowdown in China.
Amrita Sen, Energy Aspects' chief oil analyst, said: "The market is still very much in panic mode. Once we get over the panic, Brent prices will probably stabilise at around $65 to $80 a barrel in the short term."
Some analysts believe that the lower prices will make shale oil production in the UK unprofitable. The decision could also impact on the UK’s race to introduce fracking.
The lower prices will give consumers greater spending power, which could pump up demand for manufacturing and services and help the global economy.
But it will be to the detriment of oil-producing countries, such as Iran, Russia, Nigeria and Venezuela where it will add pressure to their burdened public finances.
The Russian rouble fell to a new record low against the US dollar and is down some 40% since January. Currencies in Malaysia, Japan, and Nigeria also weakened.
The fears of declining demand from China also sent copper prices to their lowest level in over four years and hit shares in mining companies.
Hopes for eurozone recovery were given another punch with figures showing that its manufacturing growth stalled in November as fresh orders dropped at the quickest pace in 19 months, despite heavy price cutting.
Chris Williamson, chief economist at survey compiler Markit, said: "The situation in euro area manufacturing is worse than previously thought... there is a risk that renewed rot is spreading across the region from the core."
