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2008 review
oil prices on the swing
ECONOMIC MELTDOWN: The bad news kept coming --
collapses of Wall Street giants; huge stock market losses; plummeting home
prices and a surge of foreclosures; desperate times for US automakers. It
added up to the worst economic crisis since the Great Depression and will
cost the US government well over $1 trillion in various rescue and
stimulus packages.
OIL PRICES: The global economic angst produced
hyper-volatile energy markets. The price of crude soared as high as $150 a
barrel in July before crashing to $33 this month. In the US, the average
price for a gallon of regular gas peaked at $4.11, then plunged below
$1.70.
Early 2008 increases
On January 2, 2008, U.S. light crude surpassed the
psychological barrier of $100 before falling to $99.69, due to tensions on
New Years Day in Nigeria and on suspicion that U.S. stocks of crude will
have dropped for the seventh consecutive week. A BBC report from the
following day stated that a single trader bid up the price. Stephen Schork,
a former floor trader on the New York Mercantile Exchange and the editor
of an oil market newsletter, said one floor trader bought 1,000 barrels
(160 m3), the smallest amount permitted, and sold it immediately for
$99.40 at a $600 loss. However, on January 3, oil rose to $100.05 a barrel
in intraday trading. Oil fell back later in the week to $97.91 at the
close of trading on Friday, January 4, in part due to a weak jobs report
that showed unemployment had risen.
Despite news on weakened demand, the price of oil once
again rose to $100.10 a barrel on February 19th after a Texas refinery
fire, rumors about OPEC production cuts, and evidence that the supply of
oil is decreasing faster than demand of oil. Oil prices rose above $101 a
barrel February 27, 2008. Oil prices surpassed $103 a barrel February 29,
2008 as continued weakness in the U.S. dollar and the prospect of lower
Federal funds rates attracted fresh capital to the oil market.
Oil prices continued to rise to $104 on March 3, 2008
continued by the weakness in the United States dollar. The OPEC on March
5, 2008 accused the United States of economic "mismanagement"
that it said is pushing oil prices to record highs, rebuffing calls to
boost output and laying blame at the feet of the George W. Bush
administration. Oil prices surged above $110 to a new inflation-adjusted
record on March 12, 2008 before settling at $109.92. Oil continued its
soar skywards, hit $111 a barrel, on March 13, 2008, before sliding back
to below $110 amid fears of economic recession in the United States. The
record was again broken on March 17, 2008, with U.S. light sweet crude
reaching $111.80. On April 15, 2008 the price of oil broke the $114 mark
for the first time. The price increased to $115.07/barrel on April 16,
2008 due to the increasing weakness of the U.S. dollar, and increased
again to $117 per barrel on April 18, 2008 after a militant group in
Nigeria said it had attacked an oil pipeline. Oil prices rose to a new
high of $119.90 a barrel on April 22, 2008, before dipping and then rising
$3 on April 25, 2008 to $119.10 on the New York Mercantile Exchange after
a news report that a ship contracted by the U.S Military Sealift Command
fired at an Iranian boat.
Mid-2008 increases
Gas prices on May 26, 2008 (Memorial Day in the United
States) outside Bakersfield, California.
On May 9, 2008, the oil price exceeded $125 per barrel
for the first time, while on May 21, 2008 the oil price exceeded already
$130 per barrel of Brent Crude. In approximately 24 hours from May 21 to
May 22nd, 2008, the price per barrel of oil passed $135.
On June 6, prices rose $11 in 24 hours, the largest
gain in history. The possibility of an attack on Iran by Israel was
considered to have contributed to the rise. The combination of two major
oil suppliers reducing supply has generated fears of a repeat of the 1973
oil crisis. The mid-July decision of the Saudi kingdom to increase oil
output has caused no significant influence on prices, but the caused the
Iranian government misgivings. According to the oil minister of the
Islamic Republic of Iran Gholam-Hossein Nozari the world markets are
saturated and that a Saudi promise of increased production would not lower
prices. Several Asian refineries were refusing Saudi petroleum in late
June as over priced and of the wrong grade.
Oil prices on June 28, hit record of $142.99 at 1:58
p.m., the highest since 1983 and to $142.97, the highest intraday price
since 1988, owing to a weak dollar, geopolitical unrest and a global
equities slump. Oil rose on July 1 to a NYME record $143.67 and a London's
ICE Futures Europe exchange record $143.91.
On July 3, "the Brent North Sea crude contract
for August delivery rose to $US145.01 a barrel" in Asian trade.
London Brent crude reached a record of $145.75 a barrel, and Brent crude
for August delivery peaked to a record $145.11 a barrel on London's ICE
Futures Europe exchange, and to $144.44 a barrel on the NYME. By midday in
Europe, light, sweet crude for August rose to a record $145.85 a barrel on
the NYME while Brent crude futures rose to a trading record of $146.69 a
barrel on the ICE Futures exchange. On July 11, Oil hit another record of
$147.00 a barrel, after a $10.00 decline in oil before.
Mid-late 2008 decreases
Oil prices began to decrease in the middle of July. On
July 15, a selloff began after remarks by Chairman of the Federal Reserve
Ben Bernanke which indicated significant demand destruction within the US
because of the high prices. Bernanke's statement precipitated an $8 drop,
the biggest since the first US-Iraq war. By the end of the week, crude oil
had fallen by 11% to $128, also affected by an apparent easing of tensions
between the US and Iran. By August 13, prices had fallen to $113 a barrel.
By the middle of September, oil price fell below $100 for the first time
in over six months, falling below $92 in the aftermath of the Lehman
Brothers bankruptcy. Prices recovered to once again cross $100 per barrel
within a few days, but the oil price remained more volatile, and heavily
influenced by the credit crunch. After the United States Congress
initially failed to pass the $700 billion bailout on September 29, the
price of oil fell almost $10 back to $96 per barrel.
On October 6, prices fell below $90, to levels last
seen in February. A stronger US dollar and a likely decline in European
demand were suggested to be among the causes. By October 24th, the price
of crude dropped to $64.15, and closed at $60.77 on November 6th (having
gone as low as $59.97 in intraday trading). By November 11th, NYMEX crude
closed at $59.33, after falling as low as $58.32. By December 5, 2008, oil
had fallen to $40.81, levels not seen since December 2004. By December 18,
oil had fallen to $36.22, this levels not seen since July 2004. One day
later, on December 19, the price of oil fell $3.05 to $33.17, prices not
seen since February 2004.
CHRONOLOGY
1.
Oil price surges over 147 dollars per barrel.
2.
The euro surges to all-time high of 1.6038 dollars.
3.
Nuclear Suppliers' Group decides to allow trade in fissile material
and technology with India ending 34-year old ban.
4.
US government takes control of ailing mortgage lenders Fannie Mae
and Freddie Mac.
5.
US investment bank Lehman Brothers goes bust.
6.
British contemporary artist Damien Hirst makes 70 million pounds
from art sale.
7.
US approves 700-billion-dollar bail-out for financial industry.
8.
Britain announces bank bail-out package.
9.
US and India seal landmark agreement on civilian nuclear
cooperation.
10.
The IMF, EU and World Bank offer Hungary emergency 25.1-
billion-dollar standby loan to bolster faltering economy, the first time
an EU member has needed such support.
11.
China announces 570-billion-dollar stimulus package.
12.
Leaders of G20 nations at meeting in Washington pledge to better
regulate global financial markets and take steps to halt a global economic
slide.
13.
Oil price plummets below 50 dollars a barrel for first time in
three years.
14.
EU agrees 200-billion-euro economic package.
15.
EU agrees economic stimulus package.
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