Oil Falls; Stocks Spike
MELISSA BLOCK, host:
Oil prices fell sharply again today, down nearly $4 a barrel by the end of trading in New York. Oil's decline sent the stock market sharply higher. The Dow Industrials gained more than 300 points. That's more than 2.5 percent. The S&P 500 was up almost as much. NPR's Jim Zarroli reports.
JIM ZARROLI: For months, consumers watched energy prices trail off into the stratosphere, breaking records with depressing regularity. And yet in a very short period of time, the energy fever seems to have broken. Oil prices peaked at $147 a barrel earlier this year. Today, they settled at around 115.
Energy analyst Phil Flynn of Alaron Trading says the decline is already affecting gasoline prices.
Mr. PHIL FLYNN (Energy Analyst): We could see one of the biggest drops in gasoline prices, you know, we've seen in a very, very long time. It's possible we could see gasoline prices come down another 50 cents or to - 75 cents a gallon. So this correction could be huge.
ZARROLI: And it's not just energy prices that have fallen, says analyst Jim Steel of HSBC.
Mr. JIM STEEL (Analyst): The decline in commodities has pretty much been all around. The grains, the base metals, energies and precious metals have all fallen.
ZARROLI: To be sure, commodity prices are still a lot higher than they were a year ago, but the decline is undeniable. Rice, silver, corn, all are down significantly. Soybean prices have fallen 35 percent since March. The price of gold peaked at $1,030 an ounce earlier this year. Today, it finished at 851.
What's happened to bring prices down so much? Phil Flynn says one big reason is the slowdown in Asia and Europe.
Mr. FLYNN: People are starting to realize that the U.S. slowdown is not going to be contained to the United States, that the rest of the world is going to feel the impact of the U.S. financial crisis. And when it comes to commodities, that means less demand and lower prices.
ZARROLI: Analysts say that when the U.S. economy seemed so much weaker than all the others, traders were afraid to hold dollars. And to hedge against the dollar's decline, they put their money into commodities. But now that other countries are hurting, too, the dollar is no longer so weak, and so there's not the same pressure on commodity prices.
The downside is that it's only happening because the world economy is slowing down, but it's been enough to push stock prices in the United States sharply higher. Jim Zarroli, NPR News, New York.