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Falling oil prices are mixed blessing
(Newsday (Melville, NY) Via Acquire Media NewsEdge) Dec. 24--Falling gasoline and home-heating oil prices might be good news for consumers, but nationally, tumbling oil prices signal a shrinking gross domestic product that suggests the recession may be worsening.
The February delivery price for light sweet crude oil fell 93 cents yesterday to close at $38.98 a barrel on the New York Mercantile Exchange. Experts say the news, including a Commerce Department report that shows sales of new homes sagged in November to their slowest pace in nearly 18 years, likely means more bad times ahead.
"The energy markets are reacting first and foremost to bad economic news, and it seems like they're almost waiting for something bad to occur," oil analyst Peter Beutel of Cameron Hanover said.
A steady outpouring of gloomy economic news has pushed to the background events that this summer sometimes led to price spikes, like OPEC production cuts, Beutel said. OPEC made an unprecedented cut again this month.
Prices have fallen 73 percent since July, with massive job layoffs and weak consumer spending eating away at energy use.
On Long Island, prices for gasoline and home-heating oil continue to decline. Since Oct. 6, the average full price for a gallon of home-heating oil has dropped 10 out of 11 weeks, falling from $3.888 to $2.766 yesterday, according to the New York State Energy Research and Development Authority. A gallon of gas at the fuel pump, as listed at the Web site longislandgasprices.com, was as low a $1.65 yesterday; the current average price for Long Island at AAA's fuelgaugereport.com is $1.903, down from $2.27 a month ago.
What the decline means, said Kevin Rooney, chief executive of the Oil Heat Institute of Long Island, likely is a return to more normalcy over the long term. "Based on national supply and demand, oil prices should be in the $45- to $55-a- barrel range," Rooney said. "I think you'll see milder increases. ... You won't get the horrendous volatility like we saw in the spring and summer."
The Commerce Department said yesterday the gross domestic product, the broadest measure of economic health, declined at an annual rate of 0.5 percent in the July-September quarter. Corporate profits fell 1.2 percent.
Some economists believe the economy's decline in the October-December period could be as large as 6 percent. If so, that would be the worst quarterly drop since 1982.
This story was supplemented with a report from The Associated Press.
To see more of Newsday, or to subscribe to the newspaper, go to http://www.newsday.com
Copyright (c) 2008, Newsday, Melville, N.Y.
Distributed by McClatchy-Tribune Information Services.
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