Dramatic drop in oil prices portends $1 gas on horizon

COLUMBUS, Ohio - Oil prices hit four-year lows yesterday as the U.S. government reported that employers in November cut the highest number of jobs in 34 years.

The continuing decline in prices is so dramatic and so sudden that it is raising the prospect that gasoline prices could soon fall below $1 a gallon.

The Labor Department's jobs data were the worst in 34 years and added more fuel to the deepening global recession. U.S. employers slashed a far-worse-than-expected 533,000 jobs last month, and the unemployment rate rose to a 15-year high of 6.7 percent.

A gallon of gasoline costs 50 cents less than it cost just last month, and people are starting to talk about $1 gas. Still, prices are a long way from that magic number - last seen in March 1999, when prices were at 97 cents a gallon, according to motor club AAA.

Prices at the pump yesterday were down 1.6 cents to $1.773 nationally, according to AAA, the Oil Price Information Service, and Wright Express.

Since July 3, when a barrel of oil closed at a record $145.29, oil has fallen 72 percent.

Just this week, in which the National Bureau of Economic Research determined that the United States is in recession, oil has fallen 25 percent.

Light, sweet crude for January delivery settled yesterday at $40.81 a barrel on the New York Mercantile Exchange, down $2.86.

For gasoline prices to get close to a $1, oil prices probably would need to fall an additional $10 a barrel - something that would have been impossible to fathom during the first part of this year as oil prices soared.

"Just seeing that '1' up there [on gas station signs] is just hard to imagine," said Kevin Keating, 65, a lawyer, as he filled up his Volvo S60 in Phoenix that advertised prices at $1.67. "Wasn't that long ago that we worried about the '4' being up there."

The jobs number, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, suggests that demand for gasoline, which has been running well below year-ago levels, even with the cheaper prices in the last several weeks, will fall even more in early 2009 as work-related driving plummets.