Lagging Demand Puts Crude Below $40

By Mark Williams

Columbus, Ohio -- Oil prices fell below $40 per barrel Friday for the first time this year as the government reported the nation's worst annual job losses since World War II.

People are traveling less, manufacturers are slashing production and there are job cuts across almost every sector of the economy, leading to a severe drop-off in energy use.

And in another bit of bad news, the average national retail price for a gasoline rose again overnight.

Gas now costs a dime more per gallon than it did just a month ago even as crude prices fall. Gasoline bottomed out at $1.61 a gallon on Dec. 30 and prices have yet to catch up with the latest drop in crude.

The Labor Department said employers slashed 524,000 jobs in December and 2.6 million jobs for all of 2008. It was the worst annual loss since 2.8 million jobs were loss in 1945, although the number of jobs has more than tripled since then. The nation's unemployment rate jumped to 7.2%, the highest since 1993.

Light, sweet crude for February delivery fell $1.80, more than 4%, to $39.90 on the New York Mercantile Exchange.

Friday's decline capped another bad week for oil prices, though crude at one point rose above $50 a barrel from a five-year low of $33.87 on Dec. 19.

Crude has closed lower every day 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% of global supply.

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