AP
Oil prices plunge, gas prices follow
Friday October 24, 3:46 pm ET
By Mark Williams, AP Business Writer
Oil falls despite OPEC cuts; gasoline costs less than last year for the first time

COLUMBUS, Ohio (AP) -- Crude prices tumbled Friday and a gallon of gasoline fell below year-ago levels for the first time in 2008, even as OPEC announced a huge production cut in an attempt to halt the declines.

Crude prices have now fallen 56 percent from the highs reached in July, and more than $41 per barrel in just the last month.

Gathered in Vienna, Austria, on Friday to stanch plunging oil prices, OPEC announced it would slash oil production by 1.5 million barrels a day.

Oil prices plunged more than 5 percent.

Investors paid little heed to OPEC attempts to limit supply, instead focusing on global demand as financial markets spiraled downward in Asia, Europe and then the United States.

Light, sweet crude for December delivery fell $3.69 to settle at $64.15 a barrel on the New York Mercantile Exchange. Prices had fallen as low as $62.85 earlier in the day.

The continuing decline in oil prices, even in the face of OPEC production cuts, only cemented bearish sentiment on the oil market.

"All OPEC confirmed for the market is how weak demand is," oil trader and analyst Stephen Schork said.

Supporting that view was a report released Friday by the U.S. Department of Transportation that showed the largest monthly decline in miles driven in 66 years.

In the month after gas prices peaked at $4.11 per gallon, Americans drove 5.6 percent less, or 15 billion fewer miles, in August 2008 compared with August 2007 -- the biggest single monthly decline since the data was first collected regularly in 1942.

Americans have drastically altered driving habits, if they are driving at all, amid a severe economic downturn. They have cut discretionary trips, and are carpooling and using public transportation more.

A Labor Department report released this month showed that the number of people who have become unemployed over the last year has risen by 2.2 million to 9.5 million.

From November through August, Americans drove 78.1 billion fewer miles than they did over the same 10-month period a year earlier. The decline is most evident in rural interstate travel where travel is down more than 4 percent compared with a 2 percent decline in urban miles traveled, according to the agency.

The Transportation Department said the biggest decline in driving was in Florida where miles traveled fell by 9.7 percent. Driving in the south Atlantic region, including Florida, fell 7.4 percent, the most of any region in the country.

And the latest weekly report from the U.S. Department of Energy shows that demand for crude has fallen in 38 of the past 42 weeks. U.S. demand is down nearly 10 percent during the past four weeks compared with last year.

That has translated into rapidly declining prices at the pump.

On Friday, for the first time this year, the average retail price of gasoline fell below what it was on the same day in 2007.

A gallon of regular gas fell 4 cents overnight to a new national average of $2.78, according to auto club AAA, the Oil Price Information Service and Wright Express. That's nearly a dollar less than what was paid last month and 4 cents below gas prices one year ago on Oct. 24.

Gas prices are off from their July peak by about a third compared with the price of crude, which has been more than halved.

There is a lag between the two prices as oil being traded now will not be delivered until next month. That oil must be refined, or turned into gasoline, and then shipped to filling stations.

As for the oil being priced on markets today, oil traders are increasingly gauging future demand on dour financial markets.

Gasoline prices are all but certain to follow that downward trend.

Fred Rozell, retail pricing director at Oil Price Information Service, said prices have room to drop another 20 to 30 cents.

Schork said he could see oil prices falling to $50 a barrel, even though he believes prices will eventually stabilize between $70 and $90.

"We're still in a hangover from the $150 party," he said.

The decline also has come on the back of a strengthening dollar. Investors often buy commodities like crude oil to hedge against a weakening dollar, and sell those investments when the dollar rebounds.

It also means that nations with rapidly growing economies such as China and India will pay more for fuel, which could force them to cut back.

On Friday, there was ample evidence of global economic volatility.

Wall Street joined world stock markets in a pullback Friday, with the Dow Jones industrials dropping 175 points and all the major indexes falling more than 2 percent.

Japan's Nikkei stock average fell a staggering 9.60 percent. In Europe, Germany's benchmark DAX index was down 7.1 percent, France's CAC40 dropped 5.7 percent while Britain's FTSE 100 sank 6.8 percent after the government said its gross domestic product fell 0.5 percent in the third quarter, putting the country on the brink of recession.

In other Nymex trading, heating oil futures fell 8.32 cents to $1.95 a gallon, while gasoline futures fell 10 cents to $1.47 a gallon. Natural gas for November delivery fell 18 cents to $6.23 per 1,000 cubic feet.

In London, November Brent crude fell $3.87 to $62.05 a barrel on the ICE Futures exchange.

AP writers Louise Watt in London, George Jahn in Vienna, Austria, Alex Kennedy in Singapore contributed to this report.

That's diamond cartel tactics.

You guys may be happy to bend over and take it. I am not.

You guys may be happy to bend over and take it. I am not.

You're right. And that is part of the point. If they aren't maximizing profit from their limited resource, why sell it low? They can cut back prices and get more money at our expense, why not?

Prices are going to go UP, not down, no matter what OPEC does. It's a finite resource. Now, is 5 bucks probably too much, and they're trying to turn too much of a profit with it? Sure, absolutely. But 87 cents is just unrealistic, and frankly 1.67 would be pushing it. People are consuming shitloads of this finite resource every day, and the expectation is that oil will either run out by 2050-2100, or it will be in such short supply that no one will be able to afford it anyway(which is the same thing). So whether OPEC is in charge or not, you aren't going to see what people deem "reasonable" prices any time soon. Not to even mention inflation.

Oil will go up because of demand, not because of supply. We will never "run out" of oil. We will transition to other sources, hopefully renewable, long before then. There is no good that is magically governed by supply sided stupidity. And the sooner we can bury Reagen's failed economic policies with him the better off we all will be.

I am actually pretty amazed that nobody really has a problem with it. Well, remember when they cut back production more on us or gas is 6.00 bucks a gallon, you were fine with the market "working itself out".

But, the recent oil spike has definitely woke a lot of people up, and there is no going back unless gas gets down to $1.50 and stays there for a long time, but OPEC does not want that to happen.

That's exactly the same thing, just in different words to make the people who get all crybaby about "OMG IT'S A DOOMSDAY THEORY" a little more comfortable. Demand will go down because supply goes down and price goes up. It's not as if supply means nothing, you're just putting it in terms of demand. For all intents and purposes, at the point where only the rich can afford it, we've run out.

And it also taxes the fuck out of petroleum.

OPEC is within their rights to cut production and move prices higher. I am within my rights to think fuck OPEC and their slow initial response to our energy crisis, the joy they've gleaned from it, and the massive amounts of BS they have pulled over the years. Trust me, every helping hand they have ever extended has the middle finger raised on it.

Everything you just said is the exact same thing as running out of oil. Almost all of the alternatives you listed(with the exception of other sources that we're working on perfecting, and may come down in price) are likely to stay expensive enough(due to processes necessary to get them) to the point where we can't necessarily rely on them for the general population. Oil works for the entire world because there is/was so damned much of it. Can those other sources work in the exact same way that oil did? Possibly, but I doubt it.

Even so, that's basically the same thing. If you want to say "crude oil" or just "oil you drill out of the ground", then we're certainly going to run out of that in the same sense I described. We have to look for *alternative sources*, like tar sands, shale, coal gasification. At that point, oil has run out. If we succeed in utilizing those sources, then maybe that will save us from the current oil problem. Right now, they're still not a perfect alternative by any means. Something we can use in the meantime? Perhaps. When those methods are viable as a source of energy that can serve all corners of the world right down to main street, then we can start saying that a mishmash of alternative sources is going to be capable of replacing it.

I know you've got a background in economics, Orme, so let me bounce this idea off of you. {snip} OPEC wants to protect their market, so they'll modulate production to keep prices in a favorable range. An increase in OPEC supply was behind the current drop in oil prices (partially, anyway -- there are obviously other factors at play, e.g. the Dow and the dollar tanking), and their recent decrease of supply will stabilize oil prices in the $50-70/bbl range. They want to keep us hooked on oil, and (imo) they probably will for at least another 25 years.

OPEC is a monopoly, which is the antithesis to capitalistic free markets.
If it was an American organization it would have been dismantled.

I've always been annoyed by the concept of "monopoly" in terms of capitalism. Basically, if you're TOO successful, you get penalized. If you have a resource that no one else has, you're penalized by being declared a monopoly. At what point does one technically become a monopoly? I have yet to see a solid line drawn at where that point is absolute.

90% market share is the legal definition of a monopoly, but the general argument is made when a company controls a resource to the degree that it can alter the pricing of that resource without fear of losing market share.

Just curious if you have a particular statute in mind here. Title and section number would be nice.

I've always been annoyed by the concept of "monopoly" in terms of capitalism. Basically, if you're TOO successful, you get penalized. If you have a resource that no one else has, you're penalized by being declared a monopoly. At what point does one technically become a monopoly? I have yet to see a solid line drawn at where that point is absolute.

I think it's moot, monopolies will always eventually fail because people will not put up with prices when they rise to a certain point and find alternatives, not to mention technology 99 percent of the time prevails in finding cheaper alternatives. It's inevitable that at some point in the next 100 years, we won't be using oil and thus the monopoly is destroyed. Capitalism remains in tact, and it's hardly the antithesis in that case.

The entire goal of capitalism is to eliminate or subdue your competition

Sherman Act, FTC Act and Clayton Act.

stuff

Here, I'll make it easy for you. Show me where I can type in a title and section here: http://www4.law.cornell.edu/uscode/

That's the United States Code. If you're referring to a specific case, I could use a reporter volume number and page citation. It's all out there. So where ever you got your information, you should be able to find it pretty easily.

Probably too harsh on the language there and I'm sure someone will get nitpicky. What I'm saying here is that it's well within the nature of capitalism for that to happen, and while it's not really the "goal" per say, it's a part of survival of the fittest. If companies were rescued from the trenches every time when another company outperformed them, that's rewarding failure and doesn't help an economy grow.

Red is consumer surplus, blue is producer surplus, Purpleishpink is consumer surplus that is "stolen" by the monopoly, orange is the consumer surplus that was destroyed by the monopoly, green is the producer surplus that was destroyed by the monopoly.

The "goal" of capitalism is to make a profit.

And where precisely is the color for "lessons learned" from businesses that failed to compete with the "monopoly", as well as those from the "monopoly's" successes and failures, which can potentially end up producing a stronger economy?

And as you can see in my correction, goal was precisely the wording that was taken out. Intense competition ensues from working towards that goal and is part of the nature of capitalism, however that competition is not the goal itself.

Go at it. I am not going to do your homework for you. You could have looked this up at google or wiki but instead you are a moron.

Ok, I have much better searching tools at my disposal than you do. "Monopoly" is not a defined term anywhere in any of the relevant titles, as far as I can tell. This bozo is the one who suggested it was, so I reasonably asked him to show me where.

Top news on CNN is Exxon reporting something in the ballpark of 14 billion in profit. The problem isn't just OPEC.

The entire goal of capitalism is to eliminate or subdue your competition.

Just curious if you have a particular statute in mind here. Title and section number would be nice.

Quote me saying that. I said your general citation to three acts was not helpful to my question. It wasn't. And you can't tell me to do my own work when you make such a specific assertion about something that doesn't exist. That's the whole reason why people who actually know what they're talking about cite their sources, or at the very least are prepared to

http://www4.law.cornell.edu/uscode/html/uscode15/usc_sup_01_15_10_1.html
http://www4.law.cornell.edu/uscode/html ... _20_I.html

Go at it. I am not going to do your homework for you. You could have looked this up at google or wiki but instead you are a moron.

Ok, I have much better searching tools at my disposal than you do. "Monopoly" is not a defined term anywhere in any of the relevant titles, as far as I can tell. This bozo is the one who suggested it was, so I reasonably asked him to show me where.

I thought it was competition in a free market that self regulated without government interference.

Government intervenes when an abusive monopoly or unfair practices take place.

Are you ACTUALLY lobbying for OPEC?
What's next? Big tobacco?

But no one can compete with a monopoly. There are no lessons learned. You are prevented from ever entering the market. But from the supply sided side, monopolies can be a good thing due to the high amount of producer surplus. But I do not believe in supply sided stupidity. Monopolies artificually reduce the consumer surplus ALONG with the producer surplus. In all cases, both the producers and consumers are worse off under a monopolized market then an "ideal" market.

Monopolies don't need competition to fail. They eventually break down because people catch on and don't buy their products or find cheap alternatives. That's the nature of the world. Lessons learned, again, come from everything people learn from their successes and failures. There are no "normal" everyday very successful businesses that don't have special features to them which make their gears turn. There's always something to be learned, even from individual business to business.