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NEW YORK -- While prices may have fallen by two-thirds since their peak last summer, oil remains expensive by historical standards, according to a report in yesterday’s New York Times.
According to the article, the resilience shown by the oil markets is not because of any improvement in the global economy or rise in oil consumption. Global demand remains on course for its steepest drop since the early 1980s, and oil inventories are at their highest levels in 19 years.
Nevertheless, oil prices have stabilized at close to $50 per barrel because oil is once again being sought by investors as a refuge against a slumping dollar and rising inflation, according to The Times. In addition, the OPEC cartel apparently succeeded in cutting output enough to match lower demand.
Investors helped drive oil prices to record levels last summer, but they deserted the oil markets during the financial crisis in a frantic flight to cash. Oil, which peaked above $140 per barrel in July, fell to $33 per barrel in December.
However, the Times report noted oil futures have rebounded and are fluctuating between $40 and $50 per barrel.
Gasoline prices could rise to an average of $2.23 a gallon this summer when driving is at its peak, according to government estimates. Prices had fallen as low as $1.60 a gallon in December, but have been holding above $2 a gallon in recent weeks, according to the report.
-- Gas Prices at Highest Point in 2009 -- April 21, 2009
-- Gas Prices Likely to Rise A Bit -- April 15, 2009
-- Gas Prices Rise, Remain Below Year-ago Levels -- April 14, 2009