Retail gasoline prices dipped for a 17th week since July 4, falling below $2
a gallon in a number of states and as low as $1.77 in Des Moines, Iowa.
While consumers, worried about a weak job market and slumping investments,
are grateful for the price relief, there are indications they are hanging on to
the money that they are not putting in the gas tank.
Oil prices hit a 20-month low Tuesday as Wall Street offered yet more
evidence that consumers have gone into hiding.
Retail gasoline prices fell to a national average of $2.22 a gallon, dragged
down by the falling price of crude, which now costs 60 percent less per barrel
than it did in mid-July.
Light, sweet crude for December delivery fell more than 5 percent, or $3.25,
to $59.16 a barrel on the New
York Mercantile Exchange. In earlier electronic trading, crude fell to
$58.32, it's lowest point since March 2007.
Oil prices fell two days ahead of a report from the International
Energy (otcbb: IENI.OB
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Agency, which some analysts expect will cut its 2009 oil
demand forecast for the third consecutive month.
Volatile price swings are occurring almost every day on the trading
floor.
While the Nymex contract is now trading near first-half 2007 prices, the
difference then between daily highs and lows was around $1.50 a barrel, while
now the average daily range is around $5.50 a barrel with recent daily peaks at
$9.50, said analyst Olivier Jakob of Petromatrix in Switzerland.
Investors have grown increasingly leery about the swooning U.S. economy,
which faces its worst recession in decades.
Industry analysts had expected China and India would continue buying crude if
the U.S. and other western nations went into recession, but the booming
economies of Asia have begun to show signs of fatigue.
Some forecasts had called for China's gross domestic product to grow 10
percent next year. More recent forecasts have it closer to 6 percent, the firm
Cameron Hanover said in a report Tuesday.
A $586 billion stimulous package in China boosted markets globally early
Monday, but those gains fizzled quickly and a sell-off that began by midday in
the U.S. continued in Asia and Europe Tuesday.
On Tuesday, the Dow sank more than 200 points after Homebuilder Toll
Brothers Inc. (nyse: TOL
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Starbucks Corp. (nasdaq: SBUX
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- people ) gave
investors more evidence the housing market and consumer
spending are getting weaker.
Toll Brothers said fourth-quarter revenue fell 41 percent from the year-ago
period, while Starbucks reported lower sales across the coffee chain, leading to
profits that fell below analysts' expectations.
Gasoline fell again overnight, dipping 2 cents to a national average of $2.22
for a gallon of regular unleaded, according to auto club AAA, the Oil Price
Information Service and Wright Express (nyse: WXS
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- people ). The
average price has fallen nearly 32 percent in the past month and, according to
AAA, could be headed to $2 a gallon nationally by year's end.
Crude demand from the U.S., the world's largest consumer of energy, is a key
driver of oil prices.
"We saw extremely poor car sales and pretty shocking unemployment numbers
from the U.S. last week," said Toby Hassall, an analyst with Commodity Warrants
Australia in Sydney. "It wouldn't surprise me if oil edged down toward $50."
U.S. car sales fell to a 25-year low in October while the unemployment rate
shot to a 14-year high of 6.5 percent last month.
Oil prices fell despite signs that OPEC members are going ahead with
production cuts agreed to at an emergency meeting in Vienna, Austria, last
month.
Many analysts are expecting another cut by the Organization of Petroleum
Exporting Countries, which will meet on Dec. 17 in Oran, Algeria.
The prime minister of Qatar said Tuesday that "fair" oil prices of between
$70 to $90 per barrel would ensure that expensive oil exploration could
continue, avoiding price spikes in the future.
Sheikh Hamad Bin Jassim Bin Jabr Al-Thani said that while oil prices below
$70 a barrel may seem like a gift to consumers, it could trigger price spikes in
the near future when demand picks up.
But for now it is waning energy demand, not the supply controlled by OPEC,
that is dominating crude prices.
Events that earlier this year threatened to cut off supply in oil producing
nations no longer appear to have the power to send prices surging.
Militants in Nigeria on Monday resumed attacks on the country's oil
installations. The military said it killed eight people while guarding a
facility in the oil-rich south of the country.
Militants frequently attack oil facilities, seeking to hobble Africa's
biggest petroleum industry and force Nigeria's federal government to send more
oil funds to the southern states where the crude is pumped.
"The focus of the market has really been on the demand side," Hassall said.
"I'd be surprised if supply side issues in Nigeria could change the mood of the
market."
In other Nymex trading, heating oil futures fell 7.48 cents to $1.93 a
gallon, while gasoline prices dropped 7.3 cents to $1.2945 a gallon. Natural gas
for December delivery tumbled 39.8 cents to $6.85 per 1,000 cubic feet.
In London, December Brent crude tumbled 6 percent, or $3.54 to $55.54 a
barrel on the ICE Futures exchange.
Associated Press writer Alex Kennedy in Singapore contributed to this
report.
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