Oil at 3-year low; gas below $2 in 23 states

Oil prices will continue to fall if economic problems persist, an analyst says.

COLUMBUS (AP) — Oil prices on Thursday hit levels not seen in more than three years and retail gasoline prices are now below $2 across nearly half of the country on dour economic reports suggesting a painful economic pullback.

Benchmark crude fell as low as $48.50 a barrel on the New York Mercantile Exchange, levels last seen on May 18, 2005, when oil hit $46.80 a barrel.

Meanwhile, prices at the pump fell again overnight nationally close to $2 a gallon, with the average price in 23 states even less than that.

“After this summer, this is wonderful ... wonderful,” said Anuj Dayal, a cab driver in New York’s Hell’s Kitchen neighborhood. “I hope gas is $1 soon. I hope it’s free.”

Gasoline prices have been halved since reaching a record above $4 in July, but relief from record crude prices has come amid a global economic meltdown.

New claims for unemployment benefits jumped last week to a 16-year high and U.S. stock markets hit multiyear lows.

“Until we get past this malaise and gloom and doom, no one wants to step up and buy this market,” said Mike Zarembski, senior commodity analyst at OptionsXpress.

Oil prices have fallen 66 percent since reaching a record $147.27 a barrel in mid-July.

Oil analyst Stephen Schork wondered if $50 would even hold.

“Maybe $50 is too conservative given the putrid, putrid look at the economy,” he said.

“If we’re not out of these doldrums nine months from now we’re looking at $30 oil.”

Schork said he expects buyers of that December contract to put the oil into storage and that inventories will continue to build.

The Energy Department’s Energy Information Administration also reported Thursday that natural gas storage levels far exceeded expectations, driving prices sharply downward.

Natural gas inventories held in underground storage in the lower 48 states rose by 16 billion cubic feet to about 3.45 trillion cubic feet for the week ended Nov. 14.

Analysts had expected little to no change in reserve levels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Gas prices fell 2.7 cents overnight to $2.02 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express.

The average price for gasoline is on pace to fall below $2 nationally by the end of the week.

The decline comes as motorists continue to drive less. The Federal Highway Administration reported Wednesday that Americans drove 10.7 billion fewer miles, or 4.4 percent, in September than a year ago, the 11th straight monthly decline. Americans have now driven 90 billion fewer miles over those 11 months than they did the year before.

Rural interstate travel fell 8 percent in September and urban interstate travel declined by 3.9 percent.