Oil Prices Keep Dropping On Demand Worries

Continuing Slide Has Gasoline Prices Down As Well; Dollar Makes Slight Gain Against Euro

(CBS/ AP)  Oil traders sent crude prices tumbling as low as $118 a barrel Tuesday on the growing belief that a U.S. economic slowdown and high energy costs are curbing consumer demand for gasoline and other petroleum products.

Crude oil finished the day just above $119 a barrel - its lowest settlement price since early May. Oil has now fallen nearly 20 percent in less than a month, reports CBS News correspondent Anthony Mason.

A day after plunging as much as $5 a barrel in a dramatic sell-off, crude continued its downward trend. Gasoline and heating oil prices also fell, while natural gas ended unchanged after Monday's steep drop.

Light, sweet crude for September delivery fell $2.24 to settle at $119.17 a barrel on the New York Mercantile Exchange, the lowest close since May 2. During trading, the contract dipped to $118 - nearly $30 below the trading high of $147.27 reached July 11.

In London, September Brent crude fell $2.98 to settle at $117.70 a barrel.

"The market psychology has finally shifted," said Stephen Schork, an analyst and trader in Villanova, Pennsylvania, adding that "$4-a-gallon gasoline has clearly killed demand."

Americans drove nearly ten billion fewer miles this May than they did in May of last year, Mason reports. For 15 straight weeks now we've pumped less gasoline than we did a year ago.

In Howard County, Md., the police department has just ordered its officers to cut their driving by 5 percent.

"Just like people tightening their belts, their families, with the economy, with gas prices the county government's got to do the same thing," Howard County executive Ken Uhlman told Mason.

After hitting a high of $4.11 a gallon in July, gas has fallen nearly a quarter in less than 3 weeks, reports Mason. That could accelerate, says trader Phil Flynn, now that the psychology in the oil market has made a u-turn.

"We could see a freefall. We could see this market fall as fast as it rose. Maybe even faster. So if we keep our fingers crossed, maybe we'll be talking about $3 gasoline again. And we could be talking about $90 crude," Flynn said.

But some analysts say oil has the potential to jump back up.

There are many factors that could keep oil from descending further, said Mike Fitzpatrick, vice president of energy and risk management at MF Global LLC. Those include political tensions in Nigeria and the Middle East, the potential for a big hurricane along the Gulf Coast, and global demand that is still growing - just not at the same pace that it had been.

"Even if it seems as though China's economic demand run has slowed some, those changes at the margins still make them a huge consumer of crude products," Fitzpatrick said.

Still, the Federal Reserve, which issued an economic assessment statement along with its decision to keep interest rates stable, said that along with tight credit and the housing contraction, "elevated energy prices are likely to weigh on economic growth over the next few quarters."

The dollar's six-week highs against the euro also contributed to oil's decline Tuesday. The euro fell to $1.5464 from the $1.5587 it bought late in New York trading Monday, making oil and other commodities less attractive to investors seeking a hedge against inflation and dollar weakness.

Natural gas futures finished unchanged at $8.726 per 1,000 cubic feet, after swinging into positive and negative territory during trading. On Monday, natural gas plunged 66.3 cents, or 7 percent, to $8.726 per 1,000 cubic feet, its lowest level in nearly six months. Prices have closed lower in eight of the last 11 sessions and dropped 36 percent from the contract's all-time trading high of $13.752, reached July 2.

The pullback is double the size of crude's recent slide. That has fed speculation on Wall Street that a large hedge fund or something like it may be near collapse and has dumped a vast amount of natural gas contracts to free up cash. Last month, SemGroup LP, based in Tulsa, Oklahoma, folded after losing $2.4 billion in bad bets on oil futures. SemGroup's collapse came amid a massive sell off in the oil market.

"Anytime you get that kind of violent price action in a short amount of time, it reeks of someone big being in trouble," Schork said.

Investors on Tuesday ignored continued tension over Iran's nuclear program. Representatives of the five permanent members of the U.N. Security Council and Germany agreed Monday to seek new sanctions against Iran after the country failed to meet a weekend deadline to respond to an offer intended to defuse the dispute, State Department spokesman Gonzalo Gallegos said.

In other Nymex trading, heating oil futures fell 6.81 cents to settle at $3.2820 a gallon, while gasoline prices dropped 4.38 cents to settle at $2.9564 a gallon.

[Gary Kempf]

Oil Prices Keep Dropping On Demand Worries

We will see, How about because it is been manipulated to death.....

[Gary Kempf]

Oil Prices Keep Dropping On Demand Worries

We will see, how about because the price has been manipulated to death....

[Gary Kempf]

Oil Prices Keep Dropping On Demand Worries

We will see, How about because it is been manipulated to death.....

[Gary Kempf]

Oil Prices Keep Dropping On Demand Worries

We will see, How about because it is been manipulated to death.....

[rf35]

But did the price drop at YOUR local gas station? Don''t expect it too, either...not more than a few cents. A token drop to try and push up demand. Now that oil and gas has eased off the spike, it''s time for the gas stations to rake in record profits like their oil company brethren.

[Gary Kempf]

Sorry for the multiple post.

[xmanborg]

Oil Prices Keep Dropping

Now GM and Ford can start to pump out more Large SUVs and go back to the good old days to 15mpg hwy and 11city.

[newz4i]

John''s only energy policy, drill for more in them thar hills, will drop too.

[meanbiker]

OPEC is playing a game.. it is called raise then lower then rise it higher then lower oil.. So the customer feels good.. Example.. Gas $2.75 then $3.10 then $2.90 then $3.50 then $3.15 so you feel good about only paying $3.15 instead of $3.50 when you had a $0.75 price increase in one month..

What a bargain..

[ddaryl1]

You see... a plan of curbing our consumption and using more alternative energies wil drop the price of oil faster then any offshore drilling.

Now I agree we need to remove our dependance on foriegn oil, but 1st I expect oil companies to tap every existing lease they have 1st. This is common sense. If we can not depend on the oil companies ot use existing leases then it is easy to see they are only posturing for a big time land grab.

2nd if there is any offshore drilling it better come with regulation that funnels significant revenue from the offshore drilling sites into alternative energy investments, and we won''t be trusting the oil companies to do the investing.

Offshore lands belong to the USA... and it is imparitive that we get paid well for those leases and use all of that money to fund alterantive energy infrastrucutre... IT IS A MUST !!!!!!!!!!

[wardoglrs]

Watch what happens before winter they will turn this on its head and pull the rug. This is a old Neo Con trick. And this is how it works... Make them think evrything is looking up and then "BAM" all those investers get taken again and they laugh all the way to the bank. Its a trap

[riddelup-2009]

Let us try this rational. The fed drops the prime and investors look to other investments for example commodities such as oil. Investors dive deeply into oil futures (demand for oil is normally not very responsive small price changes) driving up the price of oil. When oil prices go up it spurs more investment in oil futures. At last prices drive the demand down.During all this oil companies and oil product manufactures and distributors facilitate the price rise and deter the price fall. This would be a gamble if the profits were not backed up by tax incentives. Is this a possible occurrence ?

[randynason]

I don''t see anything wrong with tapping the national reserve if it provides some immediate relief to the consumer. With that in mind, we should also continue to work toward alternative fuel and energy sources. Obama''s reconsideration of some drilling is conditional upon incorporation of alternative fuel sources. McSame neglects to tell the people of this and his answer to the gas price crisis is to grant more unconditional drilling to the oil companies. That is like a death sentence for the national parks and wildlife refuge areas. Additionally, the people would not benefit from any more drilling for another 20-22 years. McSame also neglects to tell the people that oil extracted from the U.S. doesn''t stay in the U.S. It goes into a giant pool to be distributed around the world and sold to the highest bidder. McSame remains convinced that the people will remain as stupid and uninformed as they have been, this past seven and a half years. Like it, believe it or not- This is exactly what the oil companies want. They want the people to not have all the facts available and to feel divided and abandoned by their political representatives. They want to hold the people financially hostage so that they''ll grant the oil companies the unconditional right to drill, drill, drill.

[tawpdawg111]

THE PRICES CAN''T BE FALLING!

WE HAVEN"T PASSED "DRILL HERE, DRILL NOW, PAY LESS AT THE PUMP" YET!

Unless maybe it was the "speculators" all along and they are unwinding their positions.

One thing we DO need in order to be less beholding to OPEC is legislation (with TEETH!) that says ALL oil coming out of the ground in America or American waters STAYS RIGHT HERE in AMERICA!

Can I get a HARUMPH?

[checkthepast]

For those who think that their "new word" neo-con is cool to blame everything on.....

"neoconservatives - liberals who have moved to the right"

At least you are insulting only your own that are finally waking up and not the core who have always known that if you are not right you will be left.

[greeneyes222]

So the higher price of oil was driven by speculation after all - and can fall based on fears.

If ever I saw an industry crying out for regulation - after banking, importing, and transportation - this is it.

[greeneyes222]

So the higher price of oil was driven by speculation after all - and can fall based on fears.

If ever I saw an industry crying out for regulation - after banking, importing, and transportation - this is it.

[jmurrieta1]

After 8 years of unfettered power, the Republicans have done NOTHING, Zero, Zilch, to address our energy problems.

After almost 30 years in Congress, bought and paid for by his beer heiress wife, John McCain has done NOTHING, Zero, Zilch to address our energy problems.

It''s seriously time for a change. The Republican party is a total failure.

So step aside and let some grownups run things for a change.

[talkingham]

The absurdly high price of oil in the face of dropping demand clearly points out how this has been contrived to take Iraq away as the primary issue of the 08 campaign.

Instead of the multi-trillion dollar Iraq debacle the debate is now shifted to I can''t afford to drive my stupid SUV at 80mph all the time now. Another neocon manipulation of the political process at its worst!

[skyk-2009]

Folks I believe the Democrats were right again. I think this price thing was pure speculation and the falling price shows it. If we learn to drive less, use less oil, make car''s that need less oil, and create OTHER sources of energy, we can break the need of Oil completely. The thing is we can not expect the Party of Big Oil to lead us there that''s for sure.

[skyk-2009]

For those who think that their "new word" neo-con is cool to blame everything on.....

"neoconservatives - liberals who have moved to the right"

At least you are insulting only your own that are finally waking up and not the core who have always known that if you are not right you will be left.


Posted by checkthepast at 11:13 AM : Aug 05, 2008

It is embarrassing to see people with so little knowledge posting. This one is REALLY a first grader in education though! LOL Neocon MEANS Neo-Conservative. That means they aren''t just Conservative but have moved so far to the RIGHT that they are Now Radical Conservatives! If you don''t have a dictionary go to your local school and ask to borrow one. If you can''t understand the words have a student read and explain it to you!! No wonder we are living through the WORST in our History!!

[missingamerica]

"Also on Monday, Iran announced that it has tested a new weapon capable of sinking ships nearly 200 miles away..."

Gee...wonder how many of the circuit boards in those missiles were developed with components manufactured in whatever nation we in America offshored their product to...

[missingamerica]

terrorislamv -

You kinda give yourself away when you only have two primary themes: Maintain a presence in the oil-producing lands in the Middle East, and drill, drill, drill here here in America now.

If you are not careful, you will lead CBS'' readers to suspect both that you a shill for the oil industry and that oil really is why we are in Iraq.

Assuming they are not fairly certain already.

[ddaryl1]

You see... a plan of curbing our consumption and using more alternative energies wil drop the price of oil faster then any offshore drilling.

Now I agree we need to remove our dependance on foriegn oil, but 1st I expect oil companies to tap every existing lease they have 1st. This is common sense. If we can not depend on the oil companies ot use existing leases then it is easy to see they are only posturing for a big time land grab.

2nd if there is any offshore drilling it better come with regulation that funnels significant revenue from the offshore drilling sites into alternative energy investments, and we won''''t be trusting the oil companies to do the investing.

Offshore lands belong to the USA... and it is imparitive that we get paid well for those leases and use all of that money to fund alterantive energy infrastrucutre... IT IS A MUST !!!!!!!!!!

[tawpdawg111]

Can I get a HARUMPH? ----------------------------------------
-------------- Posted by Tawpdawg111

Hey, I didnt get a HARUMPH from that guy...

You there...give the Governor an HARUMPH!
-----------------------Posted by DaVicar2 at 11:29 AM : Aug 05, 2008

You watch yer AZZZZ! : )

[lochlan-2009]

Thank you Democratic controlled congress for passing the two bills halting speculation on oil markets, and the housing bill which will allow Bernanke to start raising interest rates, which will increase the value of the dollar, which will decrease the value of the comodities market.

Bring on the oil company windfall tax again, Obama, that the GOP congress denied before the recess.

[perceptions5]

All Americans can thank the new breed of "Liberal Fascists" that control our 110th Do Nothing Democrat Congress for all the pain and suffering their having.

Folks don''t HOPE for cheaper energy prices.......

VOTE for cheaper energy prices.

VOTE REPUBLICAN..........McCain / Romney......2008

[nolalou]

McCain wants offshore drilling (which he opposed only months ago, but I don''t hear anyone calling him a flip-flopper!) Obama was ridiculed for saying ''if all Americans inflated their tires properly and took their cars for regular tune-ups, they could save as much oil as new offshore drilling would produce."

By the Bush administrations own estimates , expanded offshore drilling would meet about 1% of our demand, decades from now when it''s at full production! Turns out Obama is right, conservation , keeping our cars tuned up for example, would save more, and would take effect right away, not 10 years from now!

The only solution Republicans seem to understand are the ones that enrich their oil company buddies!

[hunterdon6]

The price of oil is going down, why is the cost of gas still going up? at least in Michigan.

[ohohoh1]

Because michigan BLOWS

[brianp55]

Now the oil execs will come forward in unison and claim that they no longer have any incentive to drill. Watch for refineries to be taken off-line for "routine maintenance".

[harp1963]

Who cares. Charge us 20 dollars a gallon and shut the whole economy down.

[shanev137]

Demand worries....what a freaken joke.

Less than a month ago it almost hit $150 on demand worries. Yea, always remember folks that it''s common for global oil demand to fluctuate 30 to 40% from month-to month....because it''s always done that. hahahah

[lochlan-2009]

Thank you Democratic controlled congress, for passing the two bills halting speculation on oil markets, and the housing bill, which will allow Bernanke to start raising interest rates, which will increase the value of the dollar, which will decrease the value of the comodities market.

Bring on the oil company windfall tax again, Obama, that the GOP in congress denied before the recess.

[ioweign]

Demand worries....what a freaken joke.

Less than a month ago it almost hit $150 on demand worries. Yea, always remember folks that it''''''''s common for global oil demand to fluctuate 30 to 40% from month-to month....because it''''''''s always done that. hahahah

Posted by shanev137 at 12:58 PM : Aug 05, 2008

you an oil expert?

Posted by jamesm12341 at 12:59 PM : Aug 05, 2008


Just as much as the top two in the Executive Branch...

[consciousnes]

Americans are not stupid, when they are being held hostage by something like big oil, they will find a way around it. Just wait till the technology is perfected to run a car on water and then watch big oil drop it''s drawers.

[lochlan-2009]

Just wait till the technology is perfected to run a car on water and then watch big oil drop it''''s drawers.

Posted by Consciousnes

We''re already there with electric car. Been there for a decade. 1.6 cents per mile or a full charge for $5. Why do you think the oil men stole the White house and changed the law in California that required 10% of cars by 2003 to be LEV, then invaded Iraq and pipeline Afghanistan, pumping the price of oil through the roof, all while pushing money (American corporations) into and creating a demand in Chindia.

[shanev137]

you an oil expert?

Posted by jamesm12341 at 12:59 PM : Aug 05, 2008


--------


No, I just have common sense....as you apparently don''t.

[labrat9999]

Not sure about you people but my wallet can''t stand another 4 years of GOP rule! But you one of you GOP types can convince me otherwise I''m all ears. Please tell me why I''m better off today than I was 8 years ago?

[lochlan-2009]

you libs will never be better off than previous years because you never do anything to improve yourselves, you just sit around and *** and moan

Posted by jamesm12341

They''ll be doing something in November, won''t they?

[talkingham]

Kindaloser Rice has been out of the public eye now for a couple of weeks and suddenly the price of oil drops, they better trot her out to make some destabilizing remarks before Iraq gets back in the spotlight again.

[whitemale08]

I see folks starting to pick-up their old driving habits since oil prices have been coming down a few pennies.

Just like a crack addict little does people know that OPEC is right now cutting back production so that by next month gas prices will skyrocket again.

It''s a "break down crisis" of the global financial system, this worse then a recession even a depression.

The financial system is coming down, don''t for one minute get happy.

[marshall_nee]

Wow! The the Dow is up 300 on the back of this and the Feds inflation jawboning.

[ubrew12]

Saudi Arabia said it would increase oil production in June to battle rising prices. The price of oil went up. Now Republicans want us to believe just looking at offshore drilling is responsible for dropping the price of oil in recent weeks.

The saudi''s fired a cannon at oil, we fired a pop-gun. Neither had any affect. Oil responds primarily to demand because, at this point in the industries life-cycle, supply is LOW and DROPPING, no matter how many extra holes in the ground we drill.

Planet earth has 20-30 years of oil left, at current consumption levels. Time for some ''alternatives''.

[ubrew12]

What percentage of America''s electricity could come from solar thermal arrays covering an area 100 miles by 100 miles in the American Southwest?

A solar thermal array heats up a salt solution during the day using mirrors, but uses the salt solution to drive electric turbines all day AND all night.

Answer: all of it. A 100 mile by 100 mile area of mostly mirrors and pipes filled with salt solution collects enough energy to power the entire country of America.

[missingamerica]

Answer: all of it. A 100 mile by 100 mile area of mostly mirrors and pipes filled with salt solution collects enough energy to power the entire country of America.

Posted by ubrew12 at 03:36 PM : Aug 05, 2008

Per http://web.mit.edu/newsoffice/2008/oxygen-0731.html:

[bq]
Until now, solar power has been a daytime-only energy source, because storing extra solar energy for later use is prohibitively expensive and grossly inefficient. With today''s announcement, MIT researchers have hit upon a simple, inexpensive, highly efficient process for storing solar energy.

Requiring nothing but abundant, non-toxic natural materials, this discovery could unlock the most potent, carbon-free energy source of all: the sun. "This is the nirvana of what we''ve been talking about for years," said MIT''s Daniel Nocera, the Henry Dreyfus Professor of Energy at MIT and senior author of a paper describing the work in the July 31 issue of Science. "Solar power has always been a limited, far-off solution. Now we can seriously think about solar power as unlimited and soon."
[eq]

In related news, *** Cheney announced that a terrorist cell had been identified at the Massachusetts Institute of Technology [MIT} and elements of Blackwater Security had been sent in to control the situation due to the limited availability of uncommitted U.S. troops. Enormous fires and billowing clouds of smoke were reported to be visible from the greater Boston area.

(That last paragraph is a joke. So far.)

[mwhc1]

some of you people voted for bush... twice! man, there are so many stupid people in the world - i guess that''s what the GOP counts on. Go Republicans!

[pollroller1]

I''m retired so I don''t have to do a lot of driving. We have cut back even more. My 5 year old SUV only has 38,000 miles. The wife''s 2 year old Honda only has 16,000. I really feel for you guys that have to use you car every day. I have said and I still say that solar, wind and nuclear is our answer. I don''t know what it will take to get our leaders to do something for the people instead of just giving ear marks to their friends that come out of us peasants pockets.

[qccougars]

I''m happy that the price per barrel for oil has declined but I''ve seen very little change in the price of gas in my area. I was around during the gas shortage in the 1970''s politicians are promising the same thing today that they promised in the 70''s. The more things change the more they stay the same.

[yourpointis]

Flex-fuel....E85. It''s $3.25 a gallon here in my area. Still high, but not as bad. Can eat something besides top ramen now :)