- The Washington Times - Saturday, December 6, 2008


Oil prices reached four-year lows Friday as employers cut the highest number of jobs in 34 years. The continuing decline in prices is so dramatic and so sudden that it is raising the prospect that gas prices could soon fall below $1 a gallon.

The worst jobs data in 34 years Friday just added more weight to the deepening global recession as U.S. employers slashed a far-worse-than-expected 533,000 jobs in November and the unemployment rate rose to a 15-year high of 6.7 percent.

A gallon of gasoline can be had for 50 cents less than it cost just last month, and people are starting to talk about $1 gas.

Granted, gas prices are a long way off from that magic number last seen in March 1999, when prices were at 97 cents a gallon, according to motor club AAA.

Prices at the pump fell 1.6 cents overnight to $1.773 nationally, reported AAA, the Oil Price Information Service and Wright Express.

But consider what has happened since a barrel of oil was at a record $147.27 on July 11 and a gallon of gas was at $4.117 on July 17. In less than five months, the price of oil has fallen 72 percent.

On Friday, light, sweet crude for January delivery settled at $40.81 a barrel on the New York Mercantile Exchange, down by nearly $3 per barrel. Prices fell as low at $40.50, levels last seen in December 2004.

Gasoline futures for January delivery tumbled to 90 cents.

For gas prices to get close to $1, oil prices probably would need to fall another $10 a barrel - something that would have been impossible to fathom during the first part of this year as oil prices soared near $150 per barrel.

“Just seeing that ‘1’ up there is just hard to imagine,” said Kevin Keating, 65, who was filling up his Volvo S60 at a station in Phoenix that advertised prices at $1.67. “Wasn’t that long ago that we worried about the ‘4’ being up there.”

With wages stagnant, home prices plummeting and foreclosure rates soaring, dollar-a-gallon gas may help mom fill up the family minivan and cabdrivers in New York City, but prices that low also would truly indicate a battered economy.

“The economy at that point worldwide would be in a serious, serious deterioration,” said Geoff Sundstrom, spokesman for AAA.

Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said Thursday on his blog that retail prices could reach $1.25 a gallon soon in parts of the Midwest, including Ohio, Indiana, Illinois and Missouri.

Already, some parts of the country are seeing prices around that level. The Web site gasbuddy.com shows that motorists can fill up for $1.29 in Neelyville, Mo., a small town near the Arkansas state line.

The jobs number suggests that demand for gasoline will fall even more in early 2009 as work-related driving plummets, Mr. Kloza said.

“I believe that January 2009 will represent the most challenging and ugly economic month of my lifetime, and my first memory is of Sputnik,” he said.

But he also said he does not believe that prices will make it to $1. Gas prices neared a dollar last time on Dec. 18, 2001, three months after the terrorist attacks and during the last recession, when prices hit $1.08 a gallon.

Though the weak gasoline prices reflect the bad state of the economy, they also could help it turn around.

Mr. Kloza figures the U.S. gasoline bill will be about $20.5 billion this month, down about $16 billion from a year ago. Five years ago, the bill was $17.2 billion.

“That could be one important spur to some kind of economic recovery,” Mr. Sundstrom said.

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