It may seem hard to believe, but in June Brent crude was trading at $US112 a barrel. It fell to $US80 in November, when many were anticipating the Organisation of Petroleum Exporting Countries (OPEC) to cut production and keep the price up.

OPEC's decision not to do that has put the oil price into freefall, with Brent now trading at just over $US60 a barrel and West Texas Intermediate oil at just over $US55 a barrel.

That decision has also hit the Australian sharemarket and Aussie dollar, and has been a major factor in the markets turmoil now enveloping Russia, alongside economic sanctions.

Why are oil prices sliding?

OPEC, which in the past has had strong market power over oil prices, now finds itself against stiff competition in the form of US shale oil. OPEC - whose 12 members pump out about 40 per cent of the world's oil - has been cutting prices in an effort to retain market share. Hence the plummeting price.

What's happening to demand for oil?

The world economy is weak and suffering slowing growth and falling inflation. This lack of demand is failing to prop up the oil price.  

Why is it good for consumers?

Cheap oil means cheap petrol. Not only does that mean motorists save money at the pump, companies with high transport costs are enjoying shrinking fuel bills. Often, these savings are passed on to the consumer in the form of cheaper prices. Or, the companies enjoy higher profits and pay higher dividends to shareholders.

Shares in petrol station operator Caltex have gone from $22 in July to $32 in December. Shares in Qantas have gone from $1.30 in October to to $2.30 in December. 

If it's good for consumers, why are markets falling?

Because oil is a global commodity, Australian oil producers must charge cheaper prices as well. This means declining profits and a falling share price. Because the oil price is closely linked to the prices of other fuels - primarily gas - companies producing these commodities are also suffering lower prices, profits and share dividends.

Australia is a net oil importer but a net energy exporter, which means the impact of cheap oil here has been mixed. Australia has many energy companies - Woodside, Santos, Origin, Drillsearch and others - and the falling energy sector has dragged the local sharemarket into negative territory for 2014. Shares in Santos, for example, have fallen over 50 per cent since September.

What Australian companies have been hit hardest?

Oil and energy companies - Woodside, Santos, Oil Search, Origin, Senex Energy, Beach Energy, Drillsearch, etc. 

How low will the price of oil go?

Various "floors" in the oil price have been discussed by analysts. The United Arab Emirates, a member of OPEC, has stated that oil production won't be curbed even if prices reach $US40 a barrel. West Texas Intermediate oil has reached $US55 a barrel in recent days, so there's still a way to go.

Why isn't OPEC doing anything about it?

OPEC's next meeting is in June 2015 although it's possible an emergency meeting could be scheduled in the meantime. OPEC members Algeria and Venezuela, who need higher oil prices to support their economies, have argued for such a meeting. But other members of OPEC have opposed it.

There's no guarantee, however, the June meeting will result in a cut to oil production.