Crude oil, diesel prices plunge

| 9/25/2001

In the biggest decline since 1991, crude oil prices fell 12 percent from last week on expectations that the terrorist attacks will trigger a global recession, reducing demand for such products as diesel and gasoline. The average cost of diesel in the U.S. dropped more than 5 cents per gallon from a week ago.

Crude oil prices are down 16 percent since the attacks, which led some economists to forecast a slowdown in global economy, similar to 1991, when allied forces attacked Iraqi armies in Kuwait during the Persian Gulf War.

One analyst, Trilby Lundberg (Lundberg Survey), said consequences of the attacks on the economy and lower gas consumption during fall and winter could keep prices falling. ''But prospects for the continued falling pump prices would crumble immediately if crude oil supply, especially from the Middle East, were to appear threatened,'' she said.

Adam Sieminski, a global oil analyst at Deutsche Banc Alex Brown in Baltimore, told Bloomberg. "Going into the fourth quarter, we're looking for demand to fall by one million barrels a day. We have the same supply picture as before, but the demand picture is getting worse by the day."

The Organization of Petroleum Exporting Countries meets this week in Vienna and industry experts are saying OPEC will likely decide to leave production quotas unchanged. An output cut now would weaken demand and could cause market shares to go to non-OPEC producers, Bloomberg reported.

The weekly retail on-highway diesel prices released by the Energy Department Monday (Sept. 24) show the national average cost of diesel fell about 5.5 cents per gallon from last week.

The biggest price drop was in the Midwest region. Diesel their plummeted about 8 cents per gallon from a week ago to $1.515. The lowest prices are found in the Lower Atlantic region. Fuel there dropped 4 cents to $1.37 per gallon. The highest prices nationally are once again found in California. Fuel in the state plunged about 7 cents per gallon to $1.616. The remaining regions' price per gallon is as follows: East Coast, $1.41; New England, $1.49; Central Atlantic, $1.50; Gulf Coast, $1.40; Rocky Mountain, $1.55; and West Coast, $1.55, respectively.

Weakened demand for jet fuel is visible with other fuels declining as well.