Price of Oil Down Over $10, Gasoline Prices Keep Dropping

Thanks to growing fears that the United States has entered a prolonged recession – with some saying we’re about to see the second Great Depression – the price of oil fell over $10 per barrel today and closed below $100 for the first time since last Monday.

Most of today’s market action – marked by the DOW’s single largest daily point drop, the S&P and NASDAQ both losing roughly nine percent and oil’s second largest daily price decline – came about thanks to Congress balking at the proposed $700 billion Wall Street bailout.

This bailout, which was agreed upon in principle Sunday evening, was meant to help restore confidence in the financial markets by having the Treasury Department buy hard to value mortgage backed securities from struggling financial firms in an effort to get them lending to each other, businesses and consumers.

In addition to the House’s vote, several European bank failures helped to push the dollar up against the euro.  As I’m sure you’ve come to find out over the past several months, a stronger dollar tends to push commodity prices lower.

In turn, the price of gasoline continued to fall, and is now at a national average price of $3.60 per gallon.  Currently, Oklahoma is reporting the lowest statewide average price at $3.29 per gallon, while Hawaii is reporting the highest statewide average price at $4.34 per gallon.

The price of gas has fallen roughly 10 cents over the past week, and is now roughly 13% below the record highs set back in mid-July.  While this is certainly good news given our weak economy, we still can’t take too much solace in the recent price drop, especially considering prices are still 30% higher than what they were last year.

It’ll certainly be interesting to see how the markets react tomorrow if some sort of accord isn’t reached tonight or early tomorrow morning regarding the bailout.  (As a side note, I think I’m for the bailout, but I haven’t completely made up my mind.)

While it would certainly be nice to have oil and gasoline prices contiue to drop, if it means I’m going to be worried about my job, it’s not like I’ll be rejoicing.  And I’m sure I’m not alone in this one.



  1. I wouldn’t go counting my chickens before they’re hatched. There were analysts claiming that oil would go to $400 by Christmas just a few weeks ago. The Hedge Fund managers can do whatever they want to manipulate these prices with trillions of dollars, euros, yen, and yuan to play with in the world’s greatest monopoly game.

    We are victims of the speculators until someone with strength takes power to bring them to justice in the world court. Billions of people are being harmed: many will freeze this winter, many more will starve.

    The global meltdown will hurt the wealthiest first, but they won’t starve.

  2. What really ticks me off is the fact that oil prices have dropped considerably but gasoline prices are dropping a lot slower. The oil companies are loving their profits and since we’re consuming less gasoline than in previous years, they can use this as an excuse for higher prices. I’d also like to comment on the “drill baby drill” attitude. Lets say McCain wins the presidency and states all along the East Coast start building offshore oil rigs. It’s probable we may initially see a drop in prices just because of speculators speculating that we’re not going to be consuming as much foreign oil, even though the US won’t see any native oil for many years. (Also, forget about Alaskan oil. That’ll be exported to Asia). However, with global warming comes stronger than usual hurricanes. We see what happens when hurricanes hit. Gas prises rise. What happens when there are thousands of rigs out in the Gulf and Atlantic and we have 10 storms blow through them? It would be fine if they were safe but here’s an interesting fact:
    More than 9,000,000 gallons of oil were spilled as a result of Hurricanes Rita and Katrina. Hurricanes Katrina and Rita alone “totally destroyed” 113 off-shore oil platforms. One platform drifted 66 nautical miles before running aground on a beach in Alabama. Hurricane Dennis in 2005 nearly destroyed the then brand-new, state-of-the-art $1 billion Shell Thunder Horse platform—the largest of its kind in the world. Much of the damage from previous hurricanes was not only to the oil platforms, but to their undersea pipelines that were thrown around by moving seabeds. Also, on average, there is a major oil spill somewhere in the world once every two years. I have a feeling the East Coast will be a gooey mess and our gas prices will barely change. I see a lot of catch 22 scenarios. These are some scary days.

  3. Mark,

    Thanks for the comment, however, please check out the following post to see the relation between oil and gas prices. As you’ll see, oil prices climb much faster than gas prices, so it would makes sense that oil prices would fall faster, too.

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