Oil prices fall again with more predictions of declining global demand

Source: Agencies  |   2008-11-4  |     ONLINE EDITION

A WORSENING economic climate pushed crude futures downward and depressed gasoline futures even further yesterday, one bit of good news for consumers amid a flurry of dour economic reports.

Gasoline futures tumbled nearly 9 percent with the release of the latest data suggesting to economists that the United States is in recession.

Manufacturers reported lethargic activity numbers for October, showing the worst reading in more than a quarter century, according to the Institute for Supply Management. The group reported that the manufacturing index fell to 38.9. Any reading below 50 signals contraction.

The last time the ISM released similar numbers, in September 1982, the nation was in a deep recession.

After trading above US$69 per barrel, light, sweet crude for December delivery tumbled US$3.87 to settle at US$63.91 on the New York Mercantile Exchange.

Declining gasoline futures have led to sharp drops in the price of gasoline in the US. The price for a regular gallon of gasoline dropped to US$2.41 (63 cents a liter) nationally yesterday, down more than 30 percent from last month, according to auto club AAA, the Oil Price Information Service and Wright Express.

A prominent Canadian economist even suggested oil prices have been overlooked as a trigger for the global economic slowdown.

CIBC World Markets economist Jeff Rubin said yesterday that four of the past five global recessions were preceded by an oil shock, and this time it is no different.

Rubin said if triple-digit oil prices started the recession, then US$60 oil prices may be what ends it.

Oil industry analysts had believed that the booming economies of India and China would pick up any slackening of demand if Western nations went into recession. That view has weakened in recent months, as the economic crisis in the United States spread across the globe.