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COLUMBUS, Ohio (AP) Oil tumbled below $44 a barrel Thursday and average gasoline prices slipped under $1.80 a gallon, both four-year lows, as unemployment benefit claims hit a 26-year high and major companies announced more job cuts.
The unprecedented decline in energy prices has provided some relief to consumers and businesses. But fewer people have jobs to drive to. Gasoline futures for January delivery closed below a dollar, with optimism about the nation's economic health in serious decline. It was the first close below $1 since 2006, when gasoline began trading in the current format. When gasoline included the additive MTBE, it last crossed the $1 barrier in February 2004. Veteran energy analysts were stunned as they watched light sweet crude dip nearly 7%, or $3.12, to settle at $43.67 on the New York Mercantile Exchange by early afternoon. Just four months ago, crude rocketed close to $150 and the average gallon of gasoline went for more than $4 per gallon. Crude has fallen nearly $27 in just one month. No one believed crude would lose $100 in value between July and December, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. Some analysts believe demand could evaporate further early next year. "I think the traders are looking at that and they're saying, 'Well, December is OK, it's relatively balanced here and there, but my goodness all of these layoffs after Christmas, the cold weather, the cocooning, the bills coming due after Christmas, January is just going to be awful,"' Kloza said. Dour economic reports continue to spill out during a week when the National Bureau of Economic Research declared the economy entered a recession in December 2007. The government said the number of people continuing to claim unemployment benefits reached 4.09 million, the highest level since December 1982. Factory orders plunged a bigger-than-expected 5.1% in October caused by big cutbacks in demand for steel, autos, computers and heavy machinery. It was the largest decrease since an 8.5% fall in July 2000. The Labor Department reported that initial claims for unemployment insurance dropped to a seasonally adjusted 509,000, from an upwardly revised figure of 530,000 for the previous week. That was significantly below analysts' estimates of 537,000, according to a survey by Thomson Reuters. The four-week average of initial claims, which smooths out fluctuations, increased to 524,500, also the highest level since December 1982, the department said. The U.S. workforce is roughly 50% larger than it was in the early 1980s. As a result, the department said the proportion of workers continuing to receive jobless benefits matches a level reached 16 years ago, in September 1992, when the economy was slowly recovering from recession. There were signs that the economic environment is worsening. On Thursday AT&T said it was slashing 12,000 jobs, or about 4% of its workforce. Chemicals company DuPont said it will cut 2,500 jobs and media conglomerate Viacom said it will eliminate about 850 jobs. Many retailers posted weak sales for November, despite a shopping boost the day after Thanksgiving. Results from Wal-Mart Stores beat Wall Street estimates and the world's largest retailer predicted that sales for established stores for the current month should be at the high end of estimates. However, Costco Wholesale, usually a strong performer, reported a bigger-than expected sales decline. And mall-based stores such as teen stalwart Abercrombie & Fitch, Kohl's and Macy's fared much worse, reporting percentage declines of over 10%. Oil prices fell even after central banks in Europe and elsewhere slashed interest rates in an effort to spark their economies. The European Central Bank lowered its rate to 2.5% from 3.25%, and the Bank of England, Sweden's Riksbank and New Zealand's central bank also cut rate. Fewer jobs, fewer factory orders and slowing construction have added up to a severe drop-off in energy use, sending crude prices plunging. "People are waking up to the fact that there may not be much demand," said Phil Flynn, an analyst at Alaron Trading. Prices at the pump continued to decline, falling 1.4 cents overnight to $1.789, according to auto club AAA, the Oil Price Information Service and Wright Express. That price is down 60.2 cents from just last month. Though there are signs that Americans are able to drive more with prices plunging, Flynn does not see enough demand to justify big increases in oil and gas prices. "We have entered a new era of lower gasoline prices and oil prices," he said. The Energy Department's Energy Information Administration said in its weekly report that natural-gas inventories held in underground storage in the lower 48 states fell by 64 billion cubic feet to about 3.36 trillion cubic feet for the week ended Nov. 28. Analysts had expected a drop of between 61 billion and 66 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. In other Nymex trading, gasoline futures fell 7.2 cents to 96.95 cents a gallon. Heating oil dropped 7.49 cents to $1.5091 a gallon while natural gas for January delivery fell 33 cents to $6.017 per 1,000 cubic feet. In London, January Brent crude tumbled $3.16, to $42.28 on the ICE Futures exchange. Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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