Associated Press, MSNBC
Crude tumbled Friday and the price for a gallon of gasoline fell below year-ago levels for the first time in 2008, even as OPEC announced a huge production cut in an attempt to halt the declines.
In an emergency meeting Friday, OPEC said that it will slash oil production by 1.5 million barrels to stem the "dramatic collapse" of oil prices, but crude prices plunged anyway as financial markets spiraled downward across the globe.
Demand for crude has evaporated and the supply levers held by the Organization of Petroleum Exporting Countries appear to have little influence in the current economic climate.
Crude prices have now fallen 56 percent from the highs reached in July, and more than $41 per barrel in just the last 30 days.
Iran and Venezuela pushed for a cut of 2 million barrels a day, but there were concerns among other OPEC members that a more severe production cut would exacerbate a deteriorating economic crisis and further destroy demand.
OPEC officials, however, signaled they were prepared to slice deeper quickly if crude continues its freefall.
Light, sweet crude for December delivery fell $3.69 to settle at $64.15 a barrel on the New York Mercantile Exchange. Prices had fallen as low as $62.85 earlier in the day.
The failure of a big production cut by the Organization of Petroleum Exporting Countries to stem the slide in crude prices only cemented sentiments on the oil market.
“All OPEC confirmed for the market is how weak demand is,” oil trader and analyst Stephen Schork said.
Supporting that view was a report released Friday by the U.S. Department of Transportation that showed the largest monthly decline in miles driven in 66 years.
Americans drove 5.6 percent less, or 15 billion fewer miles, in August 2008 compared with August 2007 — the biggest single monthly decline since the data was first collected regularly in 1942.
Americans have drastically altered driving habits, if they are driving at all, amid a severe economic downturn.
From November through August, Americans drove 78.1 billion fewer miles than they did over the same 10-month period a year earlier. The decline is most evident in rural interstate travel where travel is down more than 4 percent compared with a 2 percent decline in urban miles traveled, according to the agency.
The latest weekly report from the U.S. Department of Energy shows that demand has fallen in 38 of the past 42 weeks. U.S. demand is down nearly 10 percent during the past four weeks year on year. The U.S. still consumes one out of every four barrels of oil produced.
A gallon of regular gas fell another 4 cents overnight to a new national average of $2.78, according to auto club AAA, the Oil Price Information Service and Wright Express. That’s nearly a dollar less than what was paid last month and 4 cents below a year ago and the first time this year there was a decline compared with 2007 prices.
Still, gas prices are off from their peak by about a third compared with the price of crude.
But gasoline prices are all but certain to fall further.
The world's biggest crude consumer immediately blasted OPEC.
"It has always been our view that the value of commodities, including oil, should be determined in open, competitive markets, and not by these kinds of anti-market production decisions," White House deputy press secretary Tony Fratto said Friday. "The high oil prices from the past year contributed to the slowdown in demand and the subsequent downturn in the economy, and we would ask that everyone keep that in mind going forward."
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As the economic gains continue to decline in the months ahead, so also will be the gains of the wells which draw the earth's black blood.
(This had been hinted in this old blog entry.)