Oil falls sharply on big job cuts

Source: BBC News

Oil prices have fallen to almost four-year lows after more bad economic data in the US, including unemployment benefit rises and big job cuts.

US light crude fell more than $3.12 a barrel to $43.67, its lowest level since January 2005.

London Brent fell by $3.16, to $42.24 a barrel, also a near four-year low.

Merrill Lynch analysts forecast that the price could fall as low as $30 a barrel should China fall into recession and Opec fail to cut production.

Read more: http://news.bbc.co.uk/1/hi/business/7766314.stm

Hint: It's the other "D" word.

You best buckle up.

Correlation is not causation.

If there is to be a depression, it will be due to the collapse of credit and liquidity.

You are correct.

Just because the rooster crows, it doesn't cause the sun to rise.

But, it just isn't oil prices falling.

Wages are dropping precipitously which is causing goods and services to fall, too.

I bet you can get a really good 70% off deal at the local mall, can't you?

Get ready, smarty pants.

It's on it's way.

for the collapse of credit and liquidity. What we are experiencing now is debt induced deflation. There are no more good credit risks, so credit is scarce.

The 1990's were like the roaring 20's that resulted in overextend debt and speculation, we are at the same point, and deflation/depression is the result. Greenspan and Rubinomics created a bubble that is finally popping. All prices are dropping, real estate, stocks, commodities, ... Only the dollar is going up.

As a (at-least-partial) result of the OPEC embargoes of the 1970s, demand for oil fell more than 10%. Oil demand graphs show the plateau very clearly. It took 17 years before oil consumption returned to 1973's levels.

This kept the price of oil low. It also stopped all serious fossil fuel replacement development in nuclear, solar, and other renewable energy systems. Automobile efficiency became an afterthought. It even set back natural gas use, which was once seen as a sure fix.

We are seeing the start of a similar round of energy demand destruction. The price of oil and gasoline will probably be volatile from now on. As soon as there is an uptick in demand, you can be sure the prices will rise quickly.

You are right about the collapse of credit and liquidity, but it is all of a piece. The economic fundamentals have been "gamed" since the end of the Vietnam War, and the world has accumulated more than 30 years of bad economic practice. Finance today is based on "trading paper". I think that's breaking down -- and with it, the world's energy strategy will be hit hard, probably responding in a counter-productive way.

--p!