Gas, oil costs start to decline

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Lehman Brothers, a Wall Street firm that has led the charge toward higher oil prices this year, this week altered its forecast and said oil and other commodity prices probably have peaked.

“It appears that the long-awaited commodity price correction has finally arrived,” said Lehman analyst Jim McCormick, noting that demand for oil is declining worldwide. Lehman expects premium crude prices to end the year at $110 a barrel — down significantly from $125.49, where they closed in New York trading Thursday.

In the U.S., Daniel Yergin, chairman of Cambridge Energy Research Associates, said oil prices above $100 per barrel and gas prices exceeding $4 per gallon appear to have marked a breaking point for consumers and political leaders.

“We are seeing the beginning of a powerful response,” including a “sharp shift towards fuel economy in the minds of consumers when they enter an auto showroom,” increased use of public transportation and carpooling, and enactment of the first increase in automobile fuel-efficiency standards in 32 years in December.

The changes are forcing automakers to abandon money-making strategies based on building big cars and sport utility vehicles and to expedite changes in design and engines to increase fuel efficiency, something of “great significance and lasting importance” and involving “great cost in very difficult circumstances,” Mr. Yergin said. Ford reported a record $8.7 billion loss Thursday, for a total $24 billion in losses since 2006, as consumers rejected SUVs and trucks.

As a result, last year probably marked the peak in U.S. gasoline consumption, Mr. Yergin said. “This has worldwide effects. For the nine-plus-million barrels of gasoline that the U.S. uses every day is larger than the total oil consumption of any other nation, including China.”

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