Oil prices dropped to a six-month low Thursday as investors and energy traders grew more concerned that the U.S. economy will enter another recession and that Europe’s debt problems are not closed to being solved.
As oil prices were dropping, the stock market plummeted. Major stock indexes fell more than 4 percent. The Dow Jones Industrial Average lost over 500 points. It was the worst day for the Dow since October 22, 2008.
The decline in oil should bring some needed relief to drivers. U.S. gas prices currently remain near three-year highs at a national average of $3.703 per gallon. But gas prices are expected to drop in the near future.
According to Fred Rozell, retail pricing director at Oil Price Information Service, the recent slide in oil could push gas prices 20 to 35 cents per gallon lower over the next month. “This market is moving up and down, but you could see some sizable declines at the pump if this holds,” Rozell said.
Benchmark West Texas Intermediate crude for September delivery fell $5.30, or 5.8 percent, to settle at $86.63 per barrel on the New York Mercantile Exchange. That’s the steepest drop since oil took an 8.7 percent tumble on May 5. Oil dropped as low as $86.04 per barrel earlier in the day, its lowest level since February.
Earlier in the summer, investors were still holding on to the notion that fuel prices would rise as economies in the U.S. and Europe recovered from the Great Recession. Even a pullback in U.S. gasoline consumption couldn’t push oil back from around $100 per barrel.
A string of disappointing reports on manufacturing and economic growth during the past week, combined with lawmakers squabbling over spending and debt in the U.S. and Europe, has everyone in the mood to sell oil, Rozell said.
Oil has declined for seven straight trading days. It’s down 13 percent since July 26. Prices dropped as the government reported sluggish, 1.3 percent GDP growth in the second quarter, and reports said that manufacturing activity was cooling off in the U.S. and China.
On Thursday a rising dollar also helped pull oil lower. Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude more expensive for investors holding foreign money.
“We’ve come down so far, so fast, that it seems investors are just looking for an excuse to sell,” independent analyst Jim Ritterbusch said.
If your business has been affected by this year’s high gas prices,you may want to consider investing in a fleet GPS tracking system. A GPS fleet management system can help your company save time, money and and reduce fuel costs.
For a fleet of 25 vehicles, idling time reduced by only 15 minutes per day can result in fuel savings of 562.5 gallons at a cost of about $2,081 per year at current gas prices. If you reduce idling time by 60 minutes, it would result in a fuel savings of 2,250 gallons at a cost of over $8,326 per year!