When do falling oil prices start to hurt?

Oil prices are plunging, and while consumers may be rejoicing at the gas pump, the world is watching with increasing alarm.

The average price for a gallon of gas in the U.S. is $3.18, down from $3.27 a week ago and $3.39 a month ago. It's an astonishing fall in such a short time, one that has been foretold by the ongoing decline in oil prices.

That trend continued this week. On Tuesday alone, oil prices fell the most in one day since June 2012, with U.S. benchmark WTI crude dropping to around $81.84 a barrel -- its lowest point in years.

The plunge is rocking the energy world. For many countries that depend on oil sales for income, a drop like this can be catastrophic. Venezuela, which has some of the world's largest oil reserves, is in an outright panic, calling for emergency OPEC action to stem the slide in oil prices.

"It doesn't suit anyone if the price of oil falls below $100 a barrel," Foreign Minister Rafael Ramirez said at a news conference earlier this month. OPEC's next meeting, set for Nov. 27, is widely expected to be very turbulent.

Other oil-producing countries are wondering how long they can tolerate low prices. "The fall in prices is starting to apply considerable pain to producers whose budgets require $100 (a barrel) or higher to remain fiscally balanced," Robert McNally, president of energy consultancy The Rapidan Group, told CBS MoneyWatch. Those producers include Russia, Iran and Iraq, he added.

A report out this week is fueling those worries. The International Energy Agency said if oil prices fell to $80 a barrel, nearly 3 percent of global production could be cut. The agency also said oil demand might rise by only 700,000 barrels a day this year, down from its earlier forecast of 900,000 barrels a day.

Why are prices tumbling? It's a scenario straight out of Economics 101: More supply and less demand.

The extraordinary surge in oil production in the U.S. is partly to blame. America is in a sustained oil boom, driven by an explosion of fracking in North Dakota, West Texas and other parts of the country. The U.S. is now producing some 8.7 million barrels a day, the highest level in decades.

America now imports much less oil than it did in past decades, which is contributing to a relative glut in the rest of the world. Libya and Iraq are ramping up production as well. At the same time, a lackluster economic recovery -- or perhaps a return to recession -- in Europe and slowing growth in China are restraining global demand.

With the U.S. nearly self-sufficient, other oil-producing countries have begun fighting for market share in the rest of the world. Saudi Arabia may be setting the stage for a price war in Asia by signaling recently that it would prefer lower prices rather than an OPEC production cut.

But as much as consumers are cheering low gasoline prices, at some point oil's steep plunge will hurt. It has already pulled down the stock prices of widely held energy companies. And at some point the global economy will begin to take damage from the sharp decline. But when?

For the U.S., that flash point is at a price of $75 to $85 a barrel. Goldman Sachs (GS) estimates that U.S. producers stop making money when prices fall below $85 a barrel. Other analysts say at $80 a barrel, U.S. oil drillers will start to pull back.

"Some U.S. producers will start to reconsider new drilling if prices fall below $85, especially ones that are highly indebted, unhedged or are drilling in relatively costly areas," McNally at The Rapidan Group said. "However, most U.S. production would likely continue unless prices fell into the $70 range, in which case many more companies would reconsider continued drilling."

Lower prices would endanger the vitality of the U.S. oil boom, which has been a major contributor to the economic recovery, McNally added.

For other countries, the pain has already begun. Russia has been weakened by sanctions from the U.S. and Europe over the crisis in Ukraine, and lower natural gas prices will only destabilize its economy further. Moscow has based its draft budget for 2015 on the assumption that oil sales would run at $100 a barrel. Iran, heavily reliant on oil sales for income, is also on shaky economic ground.

The ongoing price slide may have one important silver lining, however: Low oil prices could cause some countries to stockpile more barrels instead of selling them for cheap. That stored inventory could help in the long run by providing a buffer for future price swings and bolstering the world's energy security.

Experts are encouraging investors to avoid panic selling as oil continues its stormy ride. "I would urge investors to avoid knee-jerk reactions to the oil price slump and gloomy global growth forecast that is creating the current stock market volatility," said Tom Elliott, international investment strategist at deVere Group. "Volatility is normal, and what has been abnormal is the recent period of low volatility."