The words vary, but a comment from one veteran oil industry tracker pretty much sums up Wall Street’s thinking. In brief, “Talk is cheap; I would take it all with a grain of salt.”

That’s the reaction of non-belief I got over the weekend from Oppenheimer & Co.’s oil analyst, Fadel Gheit, in response to last week’s OPEC announcement at its meeting in Qatar that the 11 member-nation cartel would cut its production by 1.2 million barrels a day or 4% starting next month.

With OPEC members notorious for cheating on their well publicized claim on production cutbacks, Mr. Gheit is hardly alone in his skepticism. “The world is swimming in oil; I wouldn’t give the chances of those cuts being implemented near-term any more than 50-50,” he says. In fact, he figures in as soon as a month, some OPEC members will have already begun to increase their output to capitalize on what is still regarded as a lofty oil price.

In any case, what a difference a year makes. Last October, with crude trading in the $60-a-barrel range, one of the big Wall Street questions was: How high is high for the ballooning price of oil?

At the time, the likes of Merrill Lynch and Goldman Sachs were telling us in no uncertain times that $100-a-barrel oil was on the way. That exuberant outlook for the price of crude now looks like history. With oil having skidded from its July 2006 peak of $78.40 to the high $50s and a roughly 25% decline over the past two months, the realistic new question is: How low is low for the falling price of oil?

What makes it all so relevant, of course, at least to the holders of energy shares, is that as oil prices go — given their impact on earnings — so go energy stocks.

As of a couple of weeks ago, consensus Street estimates called for crude to average $68.62 for all of this year, up 21% from last year, and $63.01 a barrel for 2007. But many analysts have been knocking down their numbers, and there’s now a lot more talk on the Street of the possibility of $50 oil by the end of the year. In turn, this has led to a rash of brokerage earnings and rating downgrades on a wide variety of energy stocks and, concurrently, falling prices for most of these shares.

Interestingly, given the falling price of oil, there’s a good deal of talk we could see gas prices at the pump at $2 to $2.15 a gallon before year end.

Merrill is one of the latest to slash its estimated oil prices. In a commentary just sent to institutional clients, it estimated a fourth quarter reduction in West Texas Intermediate crude to $61 a barrel from $67. Its rationale: a weaker than expected supply-demand balance, very high inventory levels and the downside price risk of a warmer than normal winter.

In fact, despite roughly a $20-a-barrel drop in the price of oil over the past two months, Merrill still feels the price tag is about 60% above what could be justified by fundamental supply and demand factors.

Back in June, Merrill suggested a large reduction in OPEC output was a real possibility owing to a growing crude oil surplus. Since then, Saudi Arabia, the biggest oil producer in the cartel, reduced its output from 9.3 million barrels a day in August to 9.1 million barrels a day in September, and has said it is considering additional cuts over the coming months. In addition, other cartel members, excluding Iraq, have frequently mentioned the possibility they would initiate more cutbacks, possibly at OPEC’s next meeting in December.

Despite these threats, though, oil prices have fallen in a number of recent trading sessions, in part because of the failure of members of the cartel to live up to their agreed upon production levels. Both Kuwait and Algeria, for example, are currently producing more oil than they should be under OPEC’s guidelines.

Mr. Gheit believes OPEC’s production cutbacks of 1.2 million barrels — even if they were adhered to — would not make a dent in the world’s bloated oil inventories. While he had thought oil would average in the low $60s next year, he believes the price, given the glut, could easily fall to around the $50 range. He feels this is an especially likely scenario if there is not a particularly cold winter and global economic growth, as many expect, slows next year. If this happens, he says, “Look for speculators to run for the hills, which will take the oil price down.”

Another oil price depressant, as Mr. Gheit sees it, would be a particularly strong Democratic showing in the midterm elections, which many political pundits view as a distinct possibility. If that were to happen, the analyst observes, the Democrats would seek to do something to reduce oil imports, as well as reduce oil consumption. That, in turn, he adds, would further deflate the oil premium (which some estimate at $12 to $15 a barrel).

What about the oil stocks? Mr. Gheit notes that oil shares always reflect the near-term direction of oil prices. Accordingly, he thinks the recent sell-off in oil shares is by no means over. A further drop, he believes, would precipitate a flight to energy quality on the part of institutional investors who, he notes, always have to own some oil shares. And in this case, he thinks Exxon Mobil and Chevron would definitely be stocks to own.

dandordan@aol.com