NEW YORK -- Crude oil plunged 15 percent, the biggest decline since 1991, on expectations that the terrorist attacks in the U.S. on Sept. 11 will trigger a recession, Bloomberg News reported yesterday.
Prices are down 20 percent since the strikes on New York and Washington forced airlines to cancel flights. Retail sales also declined, leading some economists to forecast the first U.S. recession since 1991, after the economy in the second quarter grew at its slowest pace in eight years.
"If we weren't in a recession already, the events of the last two weeks tipped us into one," Joe DiPaolo, an economist at Texaco Inc., told Bloomberg. "The fall in jet fuel demand is most visible, but demand for other fuels will decline as well.''
Crude oil for November delivery fell $3.96 to $22.01 a barrel on the New York Mercantile Exchange, the lowest closing price since Oct. 29, 1999, and biggest one-day decline since Jan. 17, 1991. The last time oil fell this much was when allied forces attacked Iraqi armies in Kuwait during the Persian Gulf War, ending Baghdad's control of its smaller oil-producing neighbor.
The longer the U.S. delays its response to the terrorist attacks, the more the market focuses on the prospects for a slowing economy, traders told Bloomberg.
Demand for jet fuel fell 17 percent in the week ended Sept. 14, according to the American Petroleum Institute. On-road diesel fuel demand dropped 9.2 percent, the second straight decline.
Heating oil for October delivery fell 9.81 cents, or 14 percent, to 61.06 cents a gallon on the NYMEX, the lowest price closing since Nov. 5, 1999. Prices are 36 percent lower than at this time last year. Gasoline for October delivery fell 8.55 cents, or 12 percent, to 63.6 cents a gallon, the lowest closing price since Nov. 3, 1999. Prices are down 32 percent from this time last year.
The Organization of Petroleum Exporting Countries is expected to leave production quotas unchanged when it meets Wednesday in Vienna. The 11 OPEC nations have few options for bolstering prices. Cutting production, as they did to keep oil above $25 for most of the past two years, risks weakening demand and ceding market share to non-OPEC producers, analysts said. It would also enrage the U.S., which defended Persian Gulf oil producers from Iraq 10 years ago. So ministers say they probably will do nothing.
"We will do whatever we can to support the world economy from one side and maintain our revenue from the other side," Kuwait's Oil Minister, Adel al-Subaih, told Bloomberg. "We would be comfortable with a price at the lower half of the price band."
