Oil plummets below $100 a barrel for first time since May|CGP Grey|CC BY 2.0
Oil prices fell Tuesday below $100 a barrel for the first time since May, sparking fears of an economic slowdown that could lead to unemployment.
US oil benchmark West Texas Intermediate crude settled 8.24% lower at $99.50 a barrel, with Citigroup Inc. saying that it could drop further to $65 this year in the event of a recession.
Though retail gas prices have come down (not as much as we like), if the price of oil—the world’s most traded commodity—falls sufficiently, it will force oil firms out of business. This would result in bad debts and job losses.
And developing nations that are dependent on oil exports will see a significant drop in revenue.
Gas prices may fall
Tuesday’s fall in oil futures suggests that gasoline prices could witness a sharp descent, according to reports. But it may not be in our best interest.
While the average has fallen to $4.80 from its June peak of $5 a gallon, “further declines might not be much consolation to consumers because they could run into an economic downturn that further pressures stocks and could spill into the labor market,” according to a column in The Washington Post.
Gasoline could fall as much as 40 to 60 cents if oil stays below $100, said Patrick De Haan, petroleum analysis chief at GasBuddy.
Downturn
And while a cut in gas prices seems good for American consumers, who have been hit hard this year by record inflation rates, it signals the arrival of a meltdown, experts say.
“While no one is wishing for a recession, the fact of the matter is that economic slowdown is one of only two ways to meaningfully bring down oil prices from current levels,” said Pavel Molchanov, director at financial firm Raymond James.
It’s not just oil
Commodities like wheat, corn and copper fell below March prices, signaling a bear market. Copper fell below $8,000 a ton on the London Metal Exchange, its lowest mark in 17 months.
Copper has entered a bear market before every recession of the past 30 years.