Oil hasn't been this cheap for years

[Surlethe]

BBC

Oil prices have fallen amid continued fears that demand will sink if the global economy falls into recession.

London Brent crude oil dropped to its lowest level since May last year - it ended down $4.21 at $66.59 a barrel.

As a result of concerns about "deteriorating economic conditions" the oil cartel Opec has brought forward its emergency meeting to 24 October.

Oil prices are about half what they were in July, when US light, sweet crude hit a record of $147 a barrel.

Demand weakens

In New York, oil fell to its lowest level in 14 months. In late afternoon trading it had trimmed some of its earlier losses, but was still down $3.14 at $71.40 a barrel.

"The market is just very worried about a severe international economic downturn," said David Moore at Commonwealth Bank of Australia.

According to Mr Moore, Opec is tipped to cut production at its next meeting.

"They're thinking that oil consumption will be weaker than expected."

On Wednesday, US economic data showed that retail sales fell 1.2% in September, a sign that consumers were tightening their belts.

Also the US central bank's Beige Book report, which reflects the economic conditions, said the economy had showed further signs of contraction, fanning fears that the US economy is already in a recession.

Copper falls

Fear of slowing global economies have also hit commodity and metal prices.

Copper fell almost 8% to its lowest level since January 2006 amid fears a recession would further cut already-weakened demand for industrial metals.

Soaring financing costs and volatile copper prices have already forced some Chinese companies to limit their imports - putting further downward pressure on prices.

Bullion prices also slipped. Gold tumbled more than 5% and silver slid to its weakest level in more than two years.

Elsewhere in the metals markets, platinum, palladium and rhodium prices extended their sharp losses, on worries that demand would plunge.

Perhaps we'll look back in fifty years and say that this recession was what saved us from a bigger oil contraction; the spike in the summer woke everyone up, and now that the economy's crashing, oil's relatively cheap, and we're looking at spending our way out of it with major alternative energy investments.

[Admiral Valdemar]

A lot of big alternative energy projects are being hampered by the global downturn, so this is not so much a blessing as a curse. At a time when we desperately needed to work on getting off oil, we will be forced to keep using while expensive alternatives are snuffed out due to lack of capital. Though the irony is that high oil prices have an effect on investment for such replacements too. Similarly, nations are even more wary of action against climate change because of the economy problems, despite the new agreement today in the EU.

OPEC has said they'll cut output even more to keep prices high. Their exports have dropped over half a megabarrel since September, so we may see more cuts to keep this price or inflate it higher again (and there's no telling what damage that would do to oil thirsty states when combined with money problems). That is the crux of the problem anyway. Output is the issue, not so much price which we can see with such volatility - as was always expected - hides more fundamental problems. Poor investment in future oil production would mean a longer, more severe economic depression, so it would've been nice if those trillions going to the banks were instead spent on something that would bear fruit.

[Battlehymn Republic]

Irony's a funny thing.

[Admiral Valdemar]

Quite. The oil is cheaper than it's been in years, yet it may as well still be near $150/bbl. if no one has any money to spend.

[Enigma]

I don't give a damn about the oil price because the gas prices apparently do not follow. I mean at least here in Ottawa, the gas stations would lower the gas price by one cent a liter for every dollar lost from oil and ditto the other way around. But recently they are not doing that. I mean the gas prices should have followed suit with the oil and we'd be having $.70/liter gas but instead it is hovering around $1. It pisses me off to no end because as a delivery driver I usually fill up every 2 to 3 days and I would love a relief at the gas pumps.


When the price of oil had dropped to $80, the gas stations here dropped the price of gas to as low as $.95/liter but when the oil dropped to around $76 the gas went up to $1.05! And it is pure bullshit that the gas station's profit from gas is slim. There is no way they are getting 3% profit from gas.

[J]

Exchange rates. When oil broke $80 on the way up the Loonie was worth quite a bit more than it is now.

[Rightous Fist Of Heaven]

99+ Octane Shell V-Power cost around 1.65 €/liter during the summer when oil hit 147 $/bbl. Now 1 liter of the same stuff costs 1.519 €/liter, while the price of oil has dropped 50%. Hmm....

[TimothyC]

I saw gas for 2.569 a gallon today. Around here at least gas is falling almost as fast as it went up.

[CmdrWilkens]

One also need recall that the price "today" is actually the price for delivery roughly 2-3 months down the road. i'm not enough of a market watcher to know what the current delivery month is but I would wager that the $70/bbl oil won't actually be delivered to refineries until shortly before christmas. Prices right now should reflect, at best, adjustments to what the cost was in the beginning of September/end of August when demand first began to tail off and price drops started.

[Admiral Valdemar]

Petrol here is below £1/litre for the first time since the New Year. Supermarkets are starting a nice price war too, so along with their food offers, we'll get cheaper fuel. Doesn't help with gas for heating, but the government needs to look into that (and their painfully poor planning for future eventualities).

[Dahak]

99+ Octane Shell V-Power cost around 1.65 €/liter during the summer when oil hit 147 $/bbl. Now 1 liter of the same stuff costs 1.519 €/liter, while the price of oil has dropped 50%. Hmm....

I read a funny reason from a gas company here that said the prices won't drop that far, because of the decreased demand, they still have high maintenance costs that they have to pay and someone has to give them money...

[Ypoknons]

I'm more worried that this will impede the development of alternative energy (note to all, I don't drive, so I can't feel the pain there). With no high oil prices constantly reminding people of oil supply issues and capital/credit dried up, its going to be a lot harder for alternative energy companies to find funding. Hopefully Obama will be successful in encouraging alternative energy investments.

[The Duchess of Zeon]

I don't give a damn about the oil price because the gas prices apparently do not follow. I mean at least here in Ottawa, the gas stations would lower the gas price by one cent a liter for every dollar lost from oil and ditto the other way around. But recently they are not doing that. I mean the gas prices should have followed suit with the oil and we'd be having $.70/liter gas but instead it is hovering around $1. It pisses me off to no end because as a delivery driver I usually fill up every 2 to 3 days and I would love a relief at the gas pumps.


When the price of oil had dropped to $80, the gas stations here dropped the price of gas to as low as $.95/liter but when the oil dropped to around $76 the gas went up to $1.05! And it is pure bullshit that the gas station's profit from gas is slim. There is no way they are getting 3% profit from gas.

They were making a loss from selling gasoline recently; huge numbers of gas stations had gone out of business. The reason they're not lowering prices nearly so much is to pay off the debts they incurred to stay running.

[Kanastrous]

I don't drive, so I can't feel the pain there

I suspect that some of the pain is still being passed along to you, in the form of higher costs for anything you buy that is transported by truck, boat, or plane, or manufactured in a petroleum-products-dependent manner.

[Col. Crackpot]

They were making a loss from selling gasoline recently; huge numbers of gas stations had gone out of business. The reason they're not lowering prices nearly so much is to pay off the debts they incurred to stay running.

the levee is braking now so to speak. I paid $2.71/gallon today at a Hess station in Warwick, RI. I drive quite a bit now and the dozen or so gas stations i pass i'm seeing a drop in price of 3-4 cents every other day. There are some outliers through. Newport, outside the Navy base the Shell station is still 2.99 for regular.

[Slacker]

Gas is still $3.25 a gallon in most places on Long Island. I was lucky and found a place running at 3.18, but that's still much more than it was this time last year.

[DarkSilver]

South Louisiana still has gas for 3.30 a gallon in most places, but when I drove up to Northern-East Texas for work yesterday, gas was down to 2.65 a gallon here...

Amazing the price gradient you can get even just over state lines.