Oil, gas prices fall as economic outlook weakens
By Steven Mufson,
The weakening outlook for world economic growth is undercutting oil prices and beginning to ease prices at the gasoline pump.
But oil prices remain high by historical standards. Tom Kloza of the Oil Price Information Service estimates that U.S. drivers are on course to spend nearly half a trillion dollars on gasoline this year, which would break the record set in 2008.
For now, gas prices are heading down. Since Sept. 1, wholesale prices have tumbled 40 cents a gallon. Prices at the pump have dropped more gradually, but the nationwide average on Thursday was $3.56 a gallon, down a dime over the past two weeks. Prices in the District eased to $3.68 a gallon, down from a peak of $4.21 on May 12.
But prices are still higher than they were a year ago, when the nationwide average was $2.70 a gallon.
Adam Sieminski, chief energy economist at Deutsche Bank, said the price of crude oil, the principal raw material for gasoline, slid recently after economists lowered their growth forecasts. The International Monetary Fund trimmed its estimate of world growth to 4 percent from 4.5 percent, and Deutsche Bank cut its forecast to 3.7 percent from 4.4 percent.
“There are legitimate concerns about demand if economic growth slows,” Sieminski said. Instead of rising 1.6 million barrels a day, global oil consumption might only rise 1.2 million barrels a day under the new scenarios, Sieminski said.
In addition, confidence is growing that Libya’s civil war is drawing to a close and that the north African nation will gradually resume oil exports, perhaps reaching half a million barrels a day by the end of the year — just one-third of its pre-war level but more than its current exports.
The strength of the U.S. dollar is also containing oil prices, which are set in dollars. That means that the dollar price can fall but the cost in other currencies might stay the same or even rise. Because of fears of a possible Greek default and the shock it could cause the European financial system, the value of the euro has declined.
The price of Brent crude, the most widely used benchmark, fell $4.87, or 4.4 percent, to $105.49 a barrel for November delivery. The price of West Texas Intermediate, the New York benchmark still used in much of the United States, fell $5.41, to $80.51 a barrel.
Autumn is usually a time of weak gasoline demand, and prices frequently decline.
But Kloza said prices would not fall sharply without a new economic crisis. “If you don’t want it to be the most expensive year [for gasoline prices,] you’re surreptitiously rooting for an economic debacle,” he said.