-- Oil prices plunged to their lowest in 16 months Wednesday as global economic worries led investors to predict a further drop in energy demand.
The continuing slide in prices is good news for drivers. The nationwide average gasoline price is now the lowest in nearly a year and is set to fall further.
The price of a barrel of light, sweet crude trading for delivery in December fell $5.43, or 7.5%, to $66.75, the lowest since June 2007. Oil prices are now down 54% from the record close of $145.29 on July 3.
The drop comes as concerns mount about the health of the global economy. When economies slow, oil demand drops as consumers cut back their driving, businesses close their doors and factories churn out fewer petroleum-based products, such as tires and chemicals.
U.S. drivers used 8.845 million barrels a day of gasoline on average in the four weeks ended last Friday, down 4.2% from a year ago, the U.S. Energy Information Administration said Wednesday.
"There are concerns about how slow demand will get," says Kevin Lindemer, a private energy analyst.
The drop is coming ahead of a special meeting of the Organization of Petroleum Exporting Countries in Vienna on Friday. The oil cartel is expected to cut production. While prospects for an OPEC cut are largely being ignored, cuts by OPEC and other oil-producing nations eventually will help put a floor under oil prices, says Peter Beutel, president of energy consulting firm Cameron Hanover.
Meanwhile, consumers are benefiting. The U.S. average price for a gallon of regular gasoline was $2.858 Wednesday, down nearly 3 cents from Tuesday and 88 cents lower than a month ago, according to motorist club AAA and the Oil Price Information Service.
OPIS analyst Tom Kloza says the average price will continue to fall to $2.75 and perhaps go lower. He gives 50-50 odds of prices in the $2.25-$2.50 range. In the next few days, the average price will be below that seen a year earlier, the first time that has happened since August 2007.
If oil slides below $60, "That would put sub-$2-a-gallon prices back in play," Kloza says.
Lower oil prices are also helping to drive down residential heating oil costs. The U.S. average residential heating oil price was $3.226 a gallon Monday, down 16.4 cents from last week, the EIA said Wednesday.