Lightening the Energy Burden

Oil and natural gas prices continued to decline last week, lightening the load on the U.S. and global economies, boosting stock prices and buoying consumer confidence.

The fall in energy prices was part of a broader decline in commodity prices that, over the past three weeks, has been the steepest in 25 years.

To some degree, the drops from record levels reflect an adjustment to the prospect of slower growth in the United States and China, particularly in the construction and manufacturing sectors. But analysts said an even bigger factor is the sell-off by speculators who had poured money into commodities and energy futures, hoping to profit from the run-up or hedge against a pickup in inflation. Once it became clear that prices had begun to fall back to levels more consistent with the economic fundamentals, the speculators and the hedgers began to beat a hasty retreat from the market.

Since its peak two months ago, the price of oil futures has fallen about 20 percent, from nearly $79 a barrel to Friday’s close of about $63. Gasoline prices have fallen in tandem.

Washington Post