Falling Prices from US Jobs Figures, Recession
Dec 5th, 08
Crude future prices fell again for the 7th consecutive session towards a new four year low, on reports of the largest number of monthly job losses since 1974.
Crude future prices fell again for the 7th consecutive session towards a new four year low, on reports of the largest number of monthly job losses since 1974. An ADP National Employment Report showed that 250,000 US jobs were eliminated in November, the biggest job loss in 7 years. In November, employers laid off 533,000 jobs – the most in 34 years – and bringing the unemployment rate to 6.7 percent. Economists have predicted that the unemployment rate could go as high as 10 percent.
As it was announced earlier this week that the United States has been officially in a recession since December of 2007, the economy has since slashed 1.9 million jobs, with the number of people out of work now rising to more than 10.3 million.
On the close Friday, light, sweet crude for January delivery settled at $40.81 a barrel on the New York Mercantile Exchange, falling nearly $3 per barrel from the previous session. Prices fell as low as $40.50, hitting the four year lows last seem in December 2004, and falling 72 percent since the highs seen just five months ago.
Gasoline futures for January delivery tumbled to 90 cents.
With oil in such a spiral, many speculations have risen as to where gasoline prices would be headed. Prices throughout the United States have been well below the $2 a gallon mark, and bringing up the once impossible prospect of seeing $1 gas again.
To see gas prices reach that $1 a gallon mark, crude oil prices will need to fall nearly another $10 a barrel. While many motorists and long distance commuters would cheer for such lows, for it to become a reality, our overall economic health would be in serious jeopardy.
While good for consumers, providing the needed relief in a time of recession, oil companies have been looking at major project delays and cancellations. This brings into jeopardy the future of oil prices, while acceptable at its lows now; the current reduction in production will most certainly affect future prices, and hurt the public in the long run.
Thus a delicate balance does need to be maintained in gasoline prices, too low and the hit will be much harder down the road, too high and budgets and transportation costs begin to swell and affect other prices. So which of these opposing spectrums would the general public choose? Unfortunately, the cheers for cheaper gas will most likely be a very short lived celebration.