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 overnight to a national average [image-nocss] of $2.22 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express, dragged down by the falling price of crude, which now costs 60% less per barrel than it did in mid-July. The average price for regular unleaded gasoline has fallen nearly 32% in the last month. The average price could be headed to $2 a gallon nationally by year's end, AAA has said.
Light, sweet crude for December delivery fell $3.01 to $59.40 a barrel on the New York Mercantile Exchange. In earlier electronic trading, crude fell to $58.32, its lowest point since March 2007.
The latest decline in crude prices comes two days ahead of a report from the International Energy Agency, which some analysts expect will cut its 2009 oil demand forecast for the third consecutive month.
Sharp swings in crude prices are taking place almost daily on the New York 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. 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.
The overall trend for oil and gasoline prices, at least for now, is down.
Industry analysts had expected China and India to continue buying crude if the United States and other Western nations went into recession, but the booming economies of Asia have begun to show signs of fatigue.
Gasoline prices already has fallen well below $2 in some places. In Missouri, the website www.GasBuddy.com, where consumers post prices they spot, said a few stations in the Kansas City area were charging $1.61 for regular. Drivers were paying only slightly higher in parts of Oklahoma, Iowa, Ohio and Texas.
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 (OPEC), which will meet on December 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 rapid price surges 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 upward.
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