Oil prices jumped 14% on New Year's Eve, capping a year that saw prices soar to unprecedented heights only to give up four years of gains in just five months.
Energy prices began to collapse in July as the world's biggest economies begain to falter.
Gasoline prices have been more than halved from summer peaks above $4 giving consumers some relief, but at the cost of millions of jobs and industrywide cutbacks. Not even gas at $1.35 per gallon in some parts of the country have been enough to spur demand as Americans ride out what could become the worst economic downturn since World War II.
True to a year that has been volatile from the start, crude prices spiked on the final day of 2008, no where even close to wiping away the most severe price declines since crude started trading on the New York Mercantile Exchange in 1983.
Light, sweet crude for February delivery rose $5.57 to settle at $44.60 a barrel on Nymex with trading volumes low.
Like trading for much of the year, there seemed to be no rational explanation for the extent of Wednesday's jump in price, Tom Kloza, publisher and chief oil analyst of Oil Price Information Services
"It ended very much like it began," he said of 2008.
Few market analysts believe crude prices will not fall further, and instead saw Wednesday's spike as a blip.
Prices rose quickly after the government reported that U.S. refineries ran at 82.5% of total capacity on average for the week ended Friday, a drop of 2.2% from the prior week and below analysts' expectations that it would remain flat.
Some refiners shut operations at the end of the year for repairs, meaning that demand could outstrip supply in a few weeks, said Peter Beutel of Cameron Hanover.
Oil's collapse this year ended a bull market that began in 2002, when crude traded at $17.85 a barrel. Prices jumped 57% in 2007 to $95.98 a barrel. Prices increased rapidly 2008, fueled by speculation that soaring growth from China, India and other emerging economies would outpace demand for crude. A weaker dollar helped drive up prices to a record $147.27 a barrel on July 11 as investors dumped investments in the U.S. currency for crude.
Prices, which many industry analysts described as out of control, tumbled in July as a credit crisis in the U.S. mushroomed into a global slump in consumer spending and industrial production. Earlier this month, crude on the New York Mercantile Exchange went for $33.87, the cheapest pricetag on a barrel of oil in almost five years.
Not even hurricanes Gustav and Ike in the Gulf of Mexico in September or the Middle East conflict between Israel and Hamas have been able to stop crude's slide.
The U.S. losing nearly 2 million jobs since the recession began a year ago. The unemployment rate in November jumped to 6.7%, a 15-year high, as employers eliminated a staggering 533,000 jobs in that month alone.
Demand for oil has fallen so fast, buyers have had difficulty finding somewhere to store it at the end of the year.
The January contract, which expired Dec. 19, settled at $33.87, the lowest level since early 2004 as brokers and traders attempted to unload supply for whatever price they could get. U.S. stockpiles have risen at the key storage facility in Cushing, Okla., and tankers carrying millions of gallons of crude float around the world with no destination in mind in hopes that prices will rise.
"For 25 years I've been watching this market like a hawk and I've never seen a year like this nor would I anticipate a year like this," said Jim Ritterbusch, president of Ritterbusch and Associates.
Ritterbusch said excess liquidity early in the year spurred hedge funds to invest in oil, positions that they were forced to sell in the second half of the year as credit began to dry up.
Record prices at the pump slashed demand and Americans cut spending across the board. Americans drove more than 100 billion fewer miles between November 2007 and October 2008 than the same period a year earlier, making it the largest continuous decline in American driving in history, according to the Federal Highway Administration.
There are signs that Americans are returning to the pump slowly.
Ritterbusch notes that figures released Wednesday by the U.S. Energy Department's Energy Information Administration, show demand for gasoline fell 3.3% in 2008, but are down just 2.2% in the past four weeks.
Oil prices may have further to fall, however, before rebounding to an average of around $60 next year, Ritterbusch said.
That would suggest the economic climate improves.
The government said Wednesday that the number of newly laid off workers signing up for unemployment benefits fell sharply last week but those continuing to draw aid climbed to the highest level since 1982.
The Labor Department reported Wednesday that first-time applications filed for jobless benefits dropped by a seasonally adjusted 94,000 to 492,000 for the week ended Friday.
That decline, however, didn't signal any improvement in labor conditions. The drop — while bigger than economists expected — was partly related to seasonal adjustment difficulties and reflected some out-of-work people not making it to unemployment offices to file claims over the Christmas holiday, analysts said.
The national average at the pump ended the year at $1.61 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Prices are down 20.3 cents from a month ago and $1.426 from a year ago.
The U.S. government reported that crude stockpiles rose again last week despite expectations for a steep drop, suggesting demand continues to be weak. Gasoline reserves jumped less than forecast.
For the week ended Friday crude inventories rose by 500,000 barrels.
Analysts polled by Platts, the energy information arm of McGraw-Hill Cos., expected a draw of 1.75 million barrels.
In London, February Brent crude jumped $5.44 to end the year at $45.59 on the ICE Futures exchange.
In other Nymex trading, gasoline futures rose 12.29 cents, to settle at $1.01 a gallon. Heating oil rose 11.77 cents to settle at $1.4057 a gallon, while natural gas for February delivery tumbled 23.7 cents to settle at $5.622 per 1,000 cubic feet.
Contributing: Associated Press writers Jeannine Aversa in Washington, George Jahn in Vienna, and Alex Kennedy in Singapore