Who'd have believed as recently as July, when crude was above $145 a barrel and seemed to recognize no direction but north, that the holiday season would bring gas prices well under $2 a gallon? And maybe even more surprisingly, how much would you have wagered that the day after OPEC announced a record 2.2 million-barrels-a-day reduction in its production, the price would have slid well below $40 a barrel?

Yet, that's precisely what's happened. On Wednesday, following a cartel meeting in Algeria, the group announced the biggest production whack in its history. But the cut was itself hardly a whim: Before making that rather draconian slash, the 12-member crew had already reduced its production quota by about 1.7 million barrels a day during the past three months. And beyond OPEC's own efforts, the group apparently will be joined by such non-member producers as Russian and Azerbaijan, both of which also claim to be cutting production.

As you'd expect, the significantly lower prices are already having an effect on Western oil companies. Earlier this month, oilfield services leader Schlumberger (NYSE:SLB) announced that its 2008 earnings would fall short of expectations. And in its last rig-count announcement, Baker Hughes (NYSE:BHI) said that its tally of active oil and natural gas rigs had slid by 62 units last week. The new count of 1,790 represents a decline from the 1,824 rigs running at this time last year.

At the same time, brokerage firm Friedman Billings Ramsey downgraded Schlumberger last week, along with oilfield services second-in-command Halliburton (NYSE:HAL) and deepwater driller Diamond Offshore (NYSE:DO). The firm also lowered its ratings on land drillers Nabors Industries (NYSE:NBR) and Bronco Drilling (NASDAQ:BRNC).

So, has the price of oil completely lost its brakes, and what approach should you take if you have a taste for energy investments? I think oil's slide will end sooner than you may expect, given the cuts that are occurring in development projects worldwide.

And as to investing in energy, I urge you not to walk away from the group. Schlumberger is now more than 60% below its 52-week high and stands to recover with a vengeance when the commodities price picture turns. Beyond that, I continue to like ExxonMobil (NYSE:XOM), which has held up nicely vis-a-vis the rest of the industry, is the exploration and production major domo and likely will make solid use going forward of its strong-as-an-ox balance sheet.

Schlumberger has been adorned by five stars by Motley Fool CAPS players, whereas ExxonMobil currently wears four. Do those ratings include your votes?

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Fool contributor David Lee Smith loves the taste of oil but doesn't own shares in any of the companies listed above. He does welcome your questions, comments, or other feedback. The Fool has a disclosure policy.