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Oil Plummets on Economy Worries

NEW YORK (AP) -- Oil prices fell sharply Monday, pulling back at least temporarily from record levels as investors feared that the financial crisis that forced the sale of Bear Stearns Cos. is a sign of deep economic troubles.

Crude's plunge came even as diesel prices rose to a new record above $4 a gallon, and gas prices remained high. Diesel, used to transport the vast majority of the nation's goods, rose 1.3 cents to a national average of $4.002 a gallon Monday, according to AAA and the Oil Price Information Service. The national average price of a gallon of gas, meanwhile, dipped slightly to $3.283 a gallon, but remains 73 cents higher than a year ago.

Oil's steep decline -- falling $4.17 to $106.04 a barrel on the New York Mercantile Exchange -- came hours after futures rose to a new trading high of $111.80 on the Federal Reserve's surprise Sunday move to lower a key interest rate by a quarter point. In the past several months, Fed rate cuts have fueled rallies in oil prices.

Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is weak. Interest rate cuts, and even the prospect of future cuts, tend to weaken the dollar further.

But the mass selling Monday -- despite the Fed's Sunday rate cut, the prospect of another cut at the Fed's regular Tuesday meeting, and the fact that the dollar dropped to new lows against the euro on Monday -- could be a sign that the oil market's momentum has turned negative, analysts say.

"People are saying, well, things are a lot worse than we thought," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

JPMorgan on Sunday agreed to bail out Bear Stearns by buying the investment bank in a Fed-backed deal worth $236.2 million. While Bear shares closed at $30 a share on Friday, JP Morgan will pay only $2 per share.

Investors received more bad news about the economy when the Fed released data Monday morning that showed the nation's industrial output dropped by 0.5 percent in February, the biggest decline since October. Analysts had expected an increase of 0.1 percent.

Since oil moved above $100 a barrel last month, a growing chorus of analysts have argued that oil prices are in a bubble. Several forecasters have lowered demand growth predictions for this year, while supplies have grown.

"Oil market fundamentals do not support prices at these levels," said Addison Armstrong, director of exchange traded markets at TFS Energy Futures LLC in Stamford, Conn., in a research note.

But it remains unclear whether Monday's price plunge marks the beginning of a longer decline, or a brief profit-taking retrenchment. If prices do fall, gas and diesel prices could follow. Still, consumers should expect to pay more at the pump this spring and summer: The Energy Department expects gas prices to rise to about $3.50 a gallon, while many analysts say prices could peak between $3.75 and $4.

Diesel's surge is hurting the nation's truckers particularly hard, said Bill Graves, chief executive of the American Trucking Association.
"There is little to suggest that fuel prices will decline any time soon," Graves said in a statement. "Escalating fuel prices are hurting (truckers') businesses and affecting their livelihood."
Other energy futures also fell steeply Monday. April heating oil futures dropped 6.8 cents to $3.0785 a gallon while April gasoline futures fell 9.84 cents to $2.591 a gallon. Natural gas prices dropped 22.3 cents to $9.645 per 1,000 cubic feet.

http://biz.yahoo.com/ap/080317/oil_prices.html
 

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i just dont get it, they keep increasing production, yet prices keep going up. even with inflation and whatnot, it shouldnt be happening.
 

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i just dont get it, they keep increasing production, yet prices keep going up. even with inflation and whatnot, it shouldnt be happening.
The dollar is weaker, and crude is a commodity sold on the open market to the whole world.

So...big oil has to pay more for their crude because the dollar is weaker. They of course pass this cost on to us.

It's not like the oil industry is in a boom or anything...and it's not like America is suddenly demanding more oil. This was in the making long ago.

We do need more trains and rail here, though....there has to be better ways to move freight than trucks. The least we can do is CAFE their ass so these trucks can move from, oh, 6mpg to 13mpg and they can shut their motors off at night. Maybe it's time for those european trucks to come over here.
 

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Well one small good thing has come from high diesel prices.... trucks aren't barrelling at 90mph down the freeway any more.
Fewer wrecks caused by speed, but more traffic caused by their slow ass driving along side each other with no care to anyone behind them.

We need more rail in this country...esp in the south. I hate the way most truckers drive.

Trucks are horribly inefficient, and the drivers usually don't care about safety or economy. Peterbuilt makes a huge living building overweight trucks that can't legally tow their maxium limit because of weight standards, yet truckers buy them because they last long and they have lots of shiny crome.

They shouldn't be running these 10 liter engines all night either...put some accessory motors in there for crying out loud. If there was anything that needed a hybrid powertrain, it's these monstrosities. They say that these electric motors are torque heavy.
 

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The dollar is weaker, and crude is a commodity sold on the open market to the whole world.

So...big oil has to pay more for their crude because the dollar is weaker. They of course pass this cost on to us.

It's not like the oil industry is in a boom or anything...and it's not like America is suddenly demanding more oil. This was in the making long ago.

We do need more trains and rail here, though....there has to be better ways to move freight than trucks. The least we can do is CAFE their ass so these trucks can move from, oh, 6mpg to 13mpg and they can shut their motors off at night. Maybe it's time for those european trucks to come over here.

You try sitting in a shut-off truck in the dead of winter! People would freeze in their trucks. The only way to do it is with an APU and a space heater, plus you'd have to power the diesel tank heaters. Then you'd have dead batteries and a dead trucker...I have many friends in the trucking business and the price of diesel is hurting everyone.

...To CAFE the trucks is suicide to our economy. And as for those European trucks. They aren't built for long hauls across the U.S. They are built for short hops. With the advent of ultra low sulfur Diesel and Shell's new GTL. This should help with emissions, but not mileage necessarily.

As long as the dollar is falling there is no end in sight for high gas.
 

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I wouldn't call down $4 plummeting in light of recent increases. Financial reporters only know 2 words to describe price movements... soar and plummet
 

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You try sitting in a shut-off truck in the dead of winter! People would freeze in their trucks. The only way to do it is with an APU and a space heater, plus you'd have to power the diesel tank heaters. Then you'd have dead batteries and a dead trucker...I have many friends in the trucking business and the price of diesel is hurting everyone.
Independent diesel-powered heaters are common in Europe. Works well and it's a whole lot more efficient than running a 500hp engine just for the waste heat.
 

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Oil's steep decline -- falling $4.17 to $106.04 a barrel on the New York Mercantile Exchange --
That's not a "steep" decline.......:rolleyes: That's like driving by a restruant and smelling the food. It just makes you hungry.
 

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Fewer wrecks caused by speed, but more traffic caused by their slow ass driving along side each other with no care to anyone behind them.

We need more rail in this country...esp in the south. I hate the way most truckers drive.

Trucks are horribly inefficient, and the drivers usually don't care about safety or economy. Peterbuilt makes a huge living building overweight trucks that can't legally tow their maxium limit because of weight standards, yet truckers buy them because they last long and they have lots of shiny crome.

They shouldn't be running these 10 liter engines all night either...put some accessory motors in there for crying out loud. If there was anything that needed a hybrid powertrain, it's these monstrosities. They say that these electric motors are torque heavy.
Well we need trucks to move our things...everything. The cost of trains in a large nation just doesn't work, you can't put rails everywhere. The country is spread out, just wont work. So while we need trucks, it's a crummy job away from your loved ones for long periods of time. Now we tell them they can't have heat at night....

*****bec has enacted a law apparently to limit trucks to 105KM/h or about 64 MPH....which is only going to make passing 100% impossible. Stupid people coming up with ideas for stupid laws governing things they don't understand. Never a good idea.

Some truck companies are building hybrid trucks now. But with the cost of fuel, you honestly think if they could go from 7 MPG to 13 that they wouldnt do that? Seriously...

And the other thing, people need to stop coming up with solutions that always affect someone else. "CAFE should make them get 13 MPG" Then the same people complianing about the 35MPG CAFE rule...becuase it affects them...



And they make it sound liek 106 is cheap...oh yes, very cheap...remember last week when it was 101? and the week before at 98? lol
 
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