Oil tumbles to 4-year low on unemployment news

Source: Agencies  |   2008-12-6  |     ONLINE EDITION

OIL prices hit four-year lows yesterday as US 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 reach US$1 a gallon.

The worst jobs data in 34 years on yesterday just added more fuel to the deepening global recession as US 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.

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

A gallon (3.8 liters) of gasoline can be had for 50 cents less than it cost just last month, and people are starting to talk about US$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 US$1.773 a gallon (47 cents a liter) nationally, according to AAA, the Oil Price Information Service and Wright Express.

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

Gasoline futures for January delivery tumbled to 90 cents.

With wages stagnant, home prices plummeting and foreclosure rated soaring, dollar-a-gallon gas may help mom fill up in the family minivan and cab drivers in New York City, but prices that low also would truly speak to how rotten the economy has become.

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