Oil prices drop again as pump costs climb

COLUMBUS, Ohio - Oil prices dipped near $40 per barrel yesterday as the government reported the nation's worst annual job losses since World War II.

The sour economy is reflected in reduced travel, slashed production, and job cuts across almost every sector of the economy, leading to a severe drop-off in energy use.

But gasoline prices, which had been falling since July, have reversed course.

The average national retail price for gasoline rose yesterday, the 10th day in a row it has done so, even as crude prices fall. Gasoline bottomed out at $1.61 a gallon on Dec. 30 before rebounding with crude, but it has yet to catch up as crude drops again in volatile energy markets.

Light, sweet crude for February delivery fell 87 cents yesterday to settle at $40.83 on the New York Mercantile Exchange after dipping as low as $39.38 during the trading session.

Crude prices have fallen for four straight days, with dire economic news overshadowing armed conflict in the oil-rich Middle East, a dispute that has shut off or disrupted natural-gas supplies to more than a dozen European nations, and diminished crude exports from the Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply.

Oil prices are down 17 percent since opening Monday at $49.28.

The unemployment report shows how the worst recession in decades has taken hold of the U.S. economy. At the same time, crude oil continues to flood the market with traders storing oil at sea in hopes that it can be sold later should prices rise.

Oil analyst Stephen Schork notes in his daily report how weak the economy has become, especially in the auto and steel industries.

The Detroit Three automakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week this month, and General Motors will temporarily close 20 factories - many for the entire month of January - to cut vehicle production.

Meanwhile, U.S. Steel is idling plants in Granite City, Ill., Keewatin, Minn., and its Great Lakes Works near Detroit.

"These two anecdotes from the auto and steel industries tell us all we need to know about how dicey the current economic situation is," Schork wrote.