So the dance of the oil prices continues today with the Saudi’s saying they are planning on cutting production yet again.  I still have dreams of a $29 barrel of oil this year and hope it comes true.

Oil prices edged higher Tuesday morning, after falling for six days in a row, amid reports that Saudi Arabia will aggressively cut production.  Light, sweet crude for February delivery was up 36 cents to $37.96 a barrel.

Saudi Arabia, the world’s top oil producer, plans to reduce output even further than its previous target, according to published reports.

The kingdom has already lowered supply this month to 8 million barrels per day as part of OPEC’s agreement to reduce overall supplies by a record amount from Jan. 1.

Members of the Organization of the Petroleum Exporting Countries have been scaling back production in an attempt to put a floor under the rapidly declining price of oil.

“I think the Saudi’s are trying to single-handedly support the price of oil,” said Amanda Kurzendoerfer, a commodities analyst at Summit Energy, adding that the country is large enough to impact on oil prices.  Still, the market remains concerned about weak demand for oil and gasoline as the global economy continues to deteriorate.

The price of oil lost more than half its value in 2008 and suffered a staggering decline of more than $100 a barrel from its peak last summer.

“The market is worried that the continuing global slowdown will have a negative impact on demand,” said Andrew Lebow, a broker at energy futures trading firm MF Global in New York.

I guess I now have a good reason to move to Venezuela!  Global oil prices zoomed up to $135 a barrel this past week. But that doesn’t worry Roberto Morales, a 33-year-old Venezuelan businessman. Morales, who drives a compact Volkswagen Gol, still pays only $1.32 to fill up his car with 11 gallons of high-octane gasoline, thanks to Venezuela’s subsidized fuel price.

“This is crazy but I’m not complaining,” says Morales. “Gasoline here is cheaper than water.”

He’s not exaggerating. Gasoline prices in Venezuela are the cheapest in the world—1/15 the price of a liter of bottled water, and 1/25 the price of a liter of milk. Since 1998, Venezuela has kept the price of gas fixed at 0.097 strong bolivars a liter, or about U.S. 3¢ (lower octane is 0.070 strong bolivars). That means that consumers pay about 12¢ a gallon, or 1/33 of what their U.S. counterparts pay.

What It Costs

It’s no surprise that President Hugo Chávez, who regularly excoriates Western consumers for their wastefulness, has had a hard time preaching to his supporters about energy conservation or alternative fuels. Gasoline consumption at home has risen steadily over the last decade and is now about 320,000 barrels a day, or about 14% of the country’s current oil output of 2.3 million barrels a day. And thousands of barrels are lost daily through illicit gasoline exports to neighboring Colombia, Brazil, and Trinidad and Tobago. Still, oil consumption per capita is far lower in Venezuela than in the U.S.: about 23 barrels per day per 1,000 people vs. 69 in the U.S., according to NationMaster.com.

But Venezuela is paying a price for cheap gasoline. State oil company Petróleos de Venezuela is footing an $11 billion a year bill for underwriting and subsidizing the fuel. That’s nearly double its 2007 net income of $6.27 billion. The cost of that subsidy, along with money it pays to underwrite government social programs, has forced Petróleos de Venezuela to borrow billions on international markets to cover investments.