Oil plunges for year, losing 4 years of gains
COLUMBUS, Ohio -- 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.
The unprecedented collapse in energy prices that began in July came as the world's leading economies sank into recession.
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 on New Year's Eve rose $5.57 to $44.60 a barrel on Nymex with trading volumes low.
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.
Also, Russia's state gas monopoly Gazprom's decision to cut off gas supplies to Ukraine on Thursday might have played a role. A cutoff has raised fears of disruptions in supplies to Europe. Gazprom supplies a quarter of the gas used by EU nations, and about 80% of it goes through Ukraine.
Oil's collapse 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 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 oil.
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.
