Increased unemployment lowers oil prices even further

Oil prices have fallen by more than $1 a barrel as rising US unemployment has led to further fears of weakening demand for oil among US consumers. US light, sweet crude settled down $1 at $40.17 a barrel while London Brent slipped 25 cents to $46.21.

The US unemployment rate rose to 7.6% in January, up from 7.2% in December, according to official figures - the highest level since 1992. The rapid rise in unemployment suggests the US recession is deepening. Companies as well as individuals are cutting back on spending.

Officials from the producers cartel, the Organization of the Petroleum Exporting Countries (Opec) have said that current price level is too low for its members to make enough revenue or encourage investment in new supply.

Oil price lowest in three years

Oil prices have fallen below $50 a barrel for the first time since May 2005 amid fears of a recession and expectations that demand will drop. US light sweet crude fell to $49.75, while London-traded Brent crude fell to to $48.90 a barrel. The price of oil is around two-thirds cheaper than in July, when it hit a record above $147 a barrel. As economic slowdown has destroyed fuel demand, oil companies face the prospect of storing millions of barrels of unwanted oil. The falls on oil have mirrored weakness on equity markets, which dropped again today when European stocks hit their lowest level since March 2003.

The decline in the value of oil is good news for motorists and consumers. The price of petrol is likely to fall and utility bills will also come down if the price remains low. The fall is also likely to reduce inflationary pressure and makes more interest rate cuts more likely. Investment banks such as Deutsche Bank have warned that oil prices could fall to $40 a barrel early next year as the credit crisis hits the real economy, with the economic slowdown spreading from the US and Europe into emerging markets such as China.

Oil products dearer here than elsewhere in EU

The Irish Times reports that motorists here are being charged up to 20% more for diesel and petrol compared to consumers in other EU member states, according to official European Commission figures. Prices for oil products before tax show that petrol in Ireland is 11% more expensive than the EU average, diesel is 20% dearer and home heating oil is 13% more expensive.

The figures show that over the last six months Irish prices have changed from being much cheaper than EU prices to being much dearer. In the case of diesel, for example, prices have moved from being 13% cheaper in May to be being 20% dearer in October.

Maxol chief executive Tom Noonan said: "Ireland being the farthest island off the centre of Europe, most of the oil comes from refineries in the UK. The stuff has to be brought into Ireland by ship, so the distribution system is quite a costly one. We in Maxol made just over €10 million on a turnover of €700 million in 2007, which is hardly excessive by any standards. I can assure you that, no more than any other business in this country, we are not in a position to profiteer. Our margins are particularly low and incessant and ill-informed talk about oil prices does no one any good," Mr Noonan added.

Full article

Enough oil to go around?

The Financial Times reports this morning that output from the world's oilfields is declining faster than previously thought. According to the report by the International Energy Agency, the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term demand. It states that the demand, not just the supply, will move away from the US, Europe and Japan, towards emerging nations.

Here is the article in full.

What's Happening with Oil?

In London, today, Brent crude oil was trading at $60.55 a barrel. That's down $87 from July! The fall in fuel demand, along with a decline in market confidence has outweighed a decision by OPEC, a cartel of oil producing nations, to cut production by 1.5 million barrels a day.

OPEC has expressed concern that the record high prices in July, and the economic downturn, may have permanently damaged demand for oil. "I think they needed to do something", said Tom Orr, head of research for trading firm, Weeden & Co., in Connecticut. "If prices fall near $50 a barrel, I think they will cut more ... they have to," he added.

This article from the BBC analyses why the price of oil is sinking so fast.