December 18, 2008

Oil prices drop rapidly

POLITICS - The price of oil continued to fall today, falling below $40 US for the first time in 4.5 years despite OPEC's cut yesterday of 2.2 million barrels per day. The 13-nation Organization of Petroleum Exporting Countries accounts for about 40% of global oil supply and tries to regulate the prices by cutting/increasing output, but to little effect during the current American recession.

Earlier today oil prices fell as low as $39.19, a level not seen since at least July 2004. Overnight the contract fell $3.54 to settle at $40.06 a barrel, after touching $39.88. Yesterday prices also slid nearly 5%, or $2.07 to $41.53 US. If prices continue to slide rapidly it could be hovering around $30/barrel by Christmas Eve.

This would coincide with what some economists are predicting that the price of oil will continue its rapid decline, perhaps reaching $30/barrel by January 2009 and might fall as low as $20/barrel by March.

The TD Bank is predicting oil prices will go back up to $75/barrel by Fall 2009.

Weather patterns will also cut gasoline consumption in North America. More snow equals less driving, and therefore less need for gasoline. Right now weather watchers are predicting a Snowmageddon for parts of Canada and the United States.

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