Oil Prices Drop As Americans Drive Less

Expensive Gas Has U.S. Consumers Tightening Their Belts To Stretch Their Dollars

(CBS/AP)  Oil prices dropped below US$127 a barrel Wednesday, extending a decline of more than US$3 in the previous session on a growing sense that soaring prices have cut demand for gasoline and other fuel.

The normally busy summer driving season in the U.S. began with the just-ended Memorial Day weekend, and some analysts are predicting that data will show it had a lackluster start.

"It definitely was lower than (previous) Memorial Day weekends," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, New Jersey.

Late afternoon in Singapore, light, sweet crude for July delivery was down US$1.93 at US$126.92 a barrel in electronic trade on the New York Mercantile Exchange. The contract fell US$3.34 to settle at US$128.85 a barrel Tuesday, the first day of trade after the Memorial Day holiday.

The front-month contract is now more than US$8 off its all-time peak of US$135.09 a barrel, hit last Thursday.

U.S. Energy Department data covering the weekend won't be released until next week. But even ahead of those figures, other statistics indicated Americans were driving less because of bloated prices at the pump.

The Schork Report, edited by Stephen Schork, cited the latest statistics from the Federal Highway Administration, noting that "estimated vehicle miles traveled ... on all U.S. public roads for March 2008 fell 4.3 percent, or 11 billion, as compared with March 2007 travel.

"In fact, this is the first time estimated March travel fell since 1979 and the largest year-on-year drop in the history of the report, which dates back to 1942," said the newsletter

In a research note, Edward Meir, an analyst at MF Global UK Ltd. noted that if those trends continue "we could be heading for the first annual drop in gasoline consumption in some 17 years."

The United States is the world's largest energy consumer and fluctuations in demand there can have an outsized impact on international oil prices. Also, since Americans are particularly reliant on their cars due to a lack of mass transport in all but a few cities and they have to drive longer distances to their jobs, their consumption of gasoline is closely watched.

The decline came in the face of supply problems in Mexico and Nigeria that could have driven oil prices higher. That's an indication that demand concerns are weighing on the market and giving investors reason to pull back from the record high oil prices, analysts said.

Michael Lynch, president of Strategic Energy & Economic Research Inc. in Winchester, Massachusetts, thinks energy investors are selling on recent data showing that Americans are driving less due to high prices. That includes the weekly Energy Department reports that show gasoline demand is falling and the Federal Highway Administration data showing Americans drove fewer miles in March.

Bloomberg News' Deirdre Bolton told CBS' The Early Show that Americans aren't showing caution just behind the steering wheel, but in all aspects of their spending, referring to Tuesday's Consumer Confidence Index which was at its lowest point in nearly 16 years.

"This deepening housing slump, gasoline near $4 a gallon, rising food costs, also mounting job losses - all adding up to Americans trying to spend less," said Bolton. "Now while that might be the right strategy to run your household, it does have economists worried. Consumer spending accounts for two-thirds of GDP, so if consumers don't spend, the economy could slow down even further."

Oil prices were also pressured by the dollar, which gained ground against the yen and euro. Investors who buy commodities such as oil as a hedge against inflation when the dollar falls tend to sell when the greenback strengthens. Also, a rising dollar makes oil more expensive to overseas investors.

Investors shrugged off a number of events that could have sent oil prices higher, including news that crude oil production in Mexico fell 13 percent in April compared with the previous year, the temporary shutdown of a North Sea oil platform and the latest in a spate of oil-pipeline bombings in Nigeria.

Investors also ignored continued strength in heating oil futures, which have over the last month helped send crude oil smashing through a string of new record highs. Distillate supplies worldwide are seen as strained due to strong demand for diesel from Europe and Asia.

In other Nymex trading, June heating oil futures fell nearly 5 cents to US$3.7508 a gallon, while gasoline futures slipped by more than 3 cents to US$3.486 a gallon. Natural gas futures fell by just over 6 cents to US$11.740 per 1,000 cubic feet.

July Brent crude fell US$2.12 to US$126.17 a barrel on the ICE Futures exchange in London.

[michellem99-2009]

I am aware that the trucks that bring things to market must do so. The dear is locked in or stuck on the roads as 4 wheelers pin em in. They can''t move. Get the cars off the roads that drivers could free up the roads those whose business is trucker and the can drive,

[michellem99-2009]

Who are they kidding. Seattle THEY DRIVE MORE, Gas is over 4 doolars. Amen I and my friend use mass transit ye know buses. Most are too good to ride them. In fact he and I have our June pass. We been using public mass transit for years. Park the car.

[deacon20081]

Keep complaining about those trucks on the roads that carry materials and tools to make Service Calls and do Construction on your homes and business''s. YOU ARE PAYING FOR THE COMPANY''S FUEL EXPENSES. That is Trickle-down economics, we all have to pass on the costs to stay in business.

[lovesamerica]

Good! about time people started using less gas! Yeah I drive and have always made all my required stops at one time when possible. This will have atrickle down effect on our economy and I see a world not unlike the 1800''s coming at us soon. All technology will betoo pricey for the average folk, How much has your cable gone up? Gas prices will keep us homebound and we will all be gardening and going to one birthday meal a year. I think solar power should be made available to each home owner,and or other housing. It is less invasive than wind power and less repugnant than drilling in our artic refuge.

[thcarson-2009]

thcarson:

In total, ANWR contain enough oil to solely support U.S. consumption for 7 months (4.3B estimate) to 2 years (16B estimate). These are the USGS govt estimates.

Given that info, why are you so determined to drill there? It will not solve our problems!






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Posted by jimfinster

This is true, but we wouldn''t solely use the oil from ANWR, say we use this oil for 5% of our consumption, this is 5% more foreign oil left on the world market for up to 40 yrs (high end).

[acolton1]

Can somebody explain to me what V-8 Fuel Economy is ?
hahahahaha

Not like the Dodge where the engine shuts down 4 cylinders and it is still a V-8 but running on 4 cylinders. I am talking about a true V-8. I dont think Economy was in mind when they made the V-8.

[darnedsocks]

DOES IS SURPRISE ANYONE THAT DEMAND FOR BICYCLES AROUND THE GLOBE IS GOING WAY UP? LOL

[acolton1]

I have been driving less.

I have a question: There is a Chevy truck commericial on TV and they use the line "The best V-8 fuel economy in its class"

Is there such a think a V-8 Fuel Economy ? hahahaha

[darnedsocks]

I CURBED MY DRIVING PLANS. ORIGINALLY I WAS GOING OUT OF STATE, BUT JUST LOOKED FOR FREE THINGS TO DO CLOSE BY INSTEAD OVER THE HOLIDAY.

[worstever2]

Well what a friggin suprise.

Ford to cut production [meaning blue collar workers to loose out].

Ford to cut white collar jobs-meaning more people out of a job.

So Ford, driven by the GREED of the American car buying public, continues to make vehicles that get pitiful MPG, while consumers are grateful to put $3.00 gallon and fund the Saudi terrorists, and suddenly, morons in America change thier minds when gas goes to $4.00 gallon and no longer wants the 8 MPG Expedition or whatever.

Holy ***. I do my job well at Ford, and due to greedy *** Americans, I''m soon to be out of a job.

Or due to stupid Ford leaders who continued to make this ***.

Go to the Honda dealership and try to get a steal on a 4 door Civic ... be prepared for laughs, if they even have one in stock.

Me, my little Honda gets 28 MPG in the city easily, and my wife gets 30mpg in city. So we are not big dogs in our 18'' long SUVs going to the country club, but we will weather this just fine.

If you drive a Hummer you can go to hell.

[noloyalisti]

Time for all of us (or I guess most of us that don''t drive around in hybrids or subcompacts) to bite the bullet and park the SUVs.

Time to move back to the cities or where there is public transit and abandon the suburbs. Time to change out the government so they will support alternative energy and won''t have the war-mongering oil companies set up the energy policy.

[jimfinster]

thcarson:

In total, ANWR contain enough oil to solely support U.S. consumption for 7 months (4.3B estimate) to 2 years (16B estimate). These are the USGS govt estimates.

Given that info, why are you so determined to drill there? It will not solve our problems!

[dorreb4]

The problem is not the prices and where to get the oil from. The problem is that we need oil to run our culture. Our culture is based solely on oil and that is what needs to change. Our culture is also based upon the seven deadley sins and not the seven holy virtues.

For the most part I drive to work, I drive my kid to school, I drive to her practices and to her games, I drive to the store, I drive all the time as my city is designed for me to drive. The city should be designed so that I could walk to everything. What ever happened to those self contained communities?

[thcarson-2009]

Oil interest in the region goes back to the late 1960s. Since the 1979 energy crisis, the question of whether to drill for oil has become a hot-button issue for various groups. Most Alaskan residents, trade unions, and several business interests have supported drilling in the refuge, while environmental groups and many within the Democratic Party have traditionally opposed it. Among native Alaskan tribes, support is mixed.

In the 1990s and 2000s, votes about the status of the refuge occurred repeatedly in the U.S. House of Representatives and Senate, but as of 2007 efforts to allow drilling have always been ultimately thwarted by filibusters, amendments, or vetoes.

[thcarson-2009]

Arctic Refuge drilling was again approved by the House of Representatives as part of the Energy Bill on April 21, 2005, but the Arctic Refuge provision was later removed by the House-Senate conference committee. The Senate passed Arctic Refuge drilling on March 16, 2005 as part of the federal budget resolution for fiscal year 2006. That Arctic Refuge provision was removed during the reconciliation process, due to Democrats in the House of Representatives who signed a letter stating they would oppose any version of the budget that had Arctic Refuge drilling in it.

On December 15, 2005, Sen. Ted Stevens (R-AK) attached an Arctic Refuge drilling amendment to the annual defense appropriations bill. A group of Democratic Senators led a successful filibustering of the bill on December 21, 2005, and the language was subsequently removed from the bill.

[questionnews]

I hope the speculators choke on their $128-137/barrel oil. The prices are contrived. The only thing at this point that will bring prices down is to not drive as much or as fast, but that of crimps the style of idiots who drive their SUVs at 90mph while they talk on the phone. As far as libs go, they pay the same price as their neocon masters don''''t they?
Posted by talkingham

If they would make speculators operate with cash instead of being able to operate with paper, half of the speculators would have to get out.

[smiley676]

The rest of the world shakes its head in amazement that you are actually surprised by all this. A fitting end result of years of rampant consumerism.


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Posted by arohanui

Actually the rest of the world isn''t shaking its head, it''s trying to catch up. Credit cards and cars in every driveway are just now entering a lot of the rest of the world. It will happen to you too. Just watch and see.

As for gas prices, ours wouldn''t have gone up if the Chinese didn''t start driving. A billion people needing gas drove the prices up.

But Americans don''t have the luxury of public transportation and small cars because we live in a big country. We need to drive miles to work. And you know what, the price is worth it, not to live in a little overcrowded country.

[hober_mallow]

"...And as of noon it has spiked up more than a dollar...Thank-you worthless,pathetic ''''no new drilling'''' democrat congress..."

Bush and the Republicans OWNED the House and Senate from 2001 through the election of 2006. They passed anything they wanted. The Dems were impotent.

Bush could''ve pushed through drilling in ANWR if he had wanted to expand the effort.

He''s probably glad he didn''t. It gives him an excuse for his lack of a comprehensive energy policy.

Same as for building new refineries. Bush could''ve pushed through new refineries.

But why would he? Why would any oil company want to actually spend money to build a new refinery?

Do they (1) want to spend money to expand refining capacity to be able to sell more gas at a lower cost per gallon, or (2) save the money on new refineries and then sell less gas at more money per gallon?

Hmmmmm....

[marcosis78]

and now its back up over US$130

[shoppingnut-2009]

I know Hess does does buy their gas from the Saudis, so I buy my gas from them. I will not buy from texaco, etc.

I have seen the fuel cell car and was able to ask some questions about the car. They are currently testing it in LA, Chicago and NYC for the next three months and then the cars will go back to GM for more testing, etc. They weren''t sure when it would be on the market, but at least it is in the testing stage which is a good sign since I''ve been seeing the fuel cell car displayed by GM in Disney for many many years now.