Energy prices fell 6.3% in October after rising 2.6% in September, according to figures released today by the U.S. Dept. of Labor. October's decline was the biggest since March 1986, when energy costs fell 6.9%.
Gasoline prices plunged 10.7%, the largest decline since July, when they dropped 11%. Prices continue to drop. The average price of gasoline at the pump was $1.22 a gallon last week, the lowest since July 1999.
The price at the pump for a gallon of diesel fuel fell to $1.269 Tuesday, the lowest price since it hit $1.261 on November 15, 1999, according to the Dept. of Energy. The price on October 1 was $1.39.
Saudi Oil Minister Ali al-Naimi, whose nation holds a quarter of the world's reserves, said yesterday the oil market has entered “crisis mode” because of slowing demand and a looming price war with rivals such as Russia.
“If the price really drops and stays down, you will see a lot of instability not only in the economy but also in the stock of companies and their ability to invest in future production,” al-Naimi told reporters in Vienna.
Russia’s AO Yukos Oil Co. chief executive Mikhail Khodorkovsky has rejected calls to cut production, The Wall Street Journal reported, and OPEC members said they won’t reduce output unless non-members also lower shipments.
OPEC ministers warned that oil prices could fall toward $10 a barrel, but they said that enduring such a price drop is the only way to win cooperation from non-OPEC producers that have refused to slow their output.
Lower oil prices would be good for the struggling world economy, because they mean lower raw-material costs and lower gasoline, diesel and jet-fuel prices. But they also deal a blow to the oil and gas industry, resulting in less investment, reduced production and ultimately more volatility as supply and demand gyrate.