Cheap oil, good for consumers, is slamming stocks. Why?

The price of crude is down 28 percent this year already, which in turn has dragged down energy company shares in the Standard & Poor's 500 index by 13 percent, which has helped pull the overall index down 9 percent.

WHY IS OIL SO LOW?

Because there is so much of it.

Producers in the U.S. and abroad haven't cut back production very much, despite the low prices, and now the lifting of international sanctions against Iran could send more oil flowing into markets that are already awash in crude.

U.S. stockpiles are at their highest level in at least 80 years, and the International Energy Agency predicts that during the first half of this year global oil supply could outstrip demand by 1.5 million barrels per day.

"In the long run, lower oil prices should be positive or at worst neutral for the world economy because all they're really doing is transferring income from oil producers to oil consumers," Jessop says.

[...] this latest plunge in prices to under $30 a barrel has investors worried that oil prices are falling because global growth is slowing, as businesses and consumers in many developing countries, particularly China, cut back on spending.

Bruce Kasman, chief economist at JPMorgan Chase, says that steep drops in oil prices have historically been a sign of a weakening global economy.

According to the Federal Reserve, there is $11 trillion in outstanding residential mortgage debt.

Oil and gas company bankruptcies are rising, and the entire market for so-called junk bonds has been shaken as a result of energy company defaults.