NEW YORK – The price of oil took another sharp tumble Thursday as it appeared increasingly unlikely that OPEC members will cut production to staunch a plunge in prices that is entering its fifth month.
The lower oil prices are squeezing the revenue and profit of oil companies, but are still expected to give a lift to the U.S. economy because airlines, shippers, and consumers are paying much less for fuel.
“Gasoline is an input to almost everything that is made in this economy,” said Michael Noel, an economist at Texas Tech University.
Benchmark U.S. crude fell $2.97, or 4 per cent, to close at $74.21 Thursday afternoon. It is down 31 per cent since late June to its lowest level since September of 2010.
Brent crude, a benchmark for international crudes that is closely correlated with the price of gasoline in the U.S., fell $2.46 to close at $77.92, also its lowest level in four years.
Global crude supplies have been rising recently as production has increased in the U.S., Libya, Iraq and elsewhere. At the same time, demand for crude has been weaker than expected because of slowing economic growth in Asia and Europe.
The Organization of Petroleum Exporting Countries is scheduled to hold a meeting later this month at which its 12 members will almost certainly discuss cutting production in an effort to push prices back up.
OPEC countries increasingly need high oil prices to fund growing government budgets.
But comments by oil ministers from Saudi Arabia and Kuwait in recent days seem to suggest OPEC is unlikely to agree to a cut. If OPEC keeps supplies flowing, the price of oil could fall even further.
“The ‘What me worry?’ attitude coming out of OPEC will continue to push oil lower,” said energy analyst Stephen Schork in an interview.
U.S. drivers are rejoicing. The national average retail price of gasoline fell for the 49th straight day Thursday to $2.92 a gallon, according to AAA. That’s the lowest it has been since the fall of 2010.
The Energy Department said Wednesday that low fuel prices are expected to last into next year. It predicts the average for the year will be $2.94 a gallon, 13 per cent lower than this year’s expected average.
Jonathan Fahey can be reached at http://twitter.com/JonathanFahey .