Or, rather, no one can afford to:

Oil prices tumbled below $40 for the first time since the summer of 2004 Wednesday despite an announcement from OPEC of a record production cut of 2.2 million barrels a day.

Markets had already priced in a vastly reduced flow of oil and traders focused instead on troubling economic data that points to a long and severe recession.

Light, sweet crude for January delivery tumbled 8 percent, or $3.54, to settle at $40.06 on the New York Mercantile Exchange. Benchmark crude prices fell as low as $39.88, a price last seen in July 2004.

“There’s just so much oil in inventory out there right now,” said Michael Lynch, president of Strategic Energy & Economic Research. “Nobody wants to buy this stuff.”

Crude prices have fallen so low, producers have leased supertankers to store the oil at sea, hoping that oil will rebound.

U.S. gasoline inventories continued to rise, the government reported, providing further evidence of a major pullback by American motorists.

Demand for gasoline over the four weeks ended Dec. 12 was 2.7 percent lower than a year earlier.

OPEC had already announced cuts totaling 2 million barrels earlier this year, also with little effect. The unprecedented production cuts and the market reaction show just how fast energy demand has fallen during the worst economic downturn in at least a generation.

“You’ve got a commodity that people are buying less of because they can’t afford to buy more,” said Phil Flynn, an analyst at Alaron Trading Corp. “People are fearful. They have a lack of confidence in the economy. They’re closing their factories.”

Grim economic news radiates out of the U.S., Europe and Asia almost daily as consumers and industries pull back on spending.

Via Forbes

Grant Brissey covered everything from hard news and technology, to music, film, and visual arts during his time working for The Stranger. Grant's work has also appeared at Geekwire, and in Billboard,...

11 replies on “‘Nobody wants to buy this stuff’”

  2. they crossed the $4 rubicon, and everyone freaked the fuck out. now everybody’s hiding under a rock.

    but i haven’t done shit different in 6 months. hell, i took a 1500 mile road trip in an SUV in July!

  3. Anyone else get a weird premonitory shudder about having supertankers full of oil just tooling indefinitely around? This seems — unstable.

  4. @3: Beat me to it. Leaving millions of gallons of oil sitting in big, idle supertankers, just waiting for something to go wrong, seems like a potentially terrible idea to me also.

  6. The real illusion is per barrel pricing for oil. It doesn’t cost them $40 to pull a barrel of oil from the ground…it doesn’t cost them a $1 or even a penny!

  7. A lot of this is all the money being taken out of speculation, and all the new regulation and oversight into what was being done.

    That said, by 2012, expect $100 a barrel for oil again.

  8. The bigger story here is that the massive run-up in the price of oil–and other commodities–like platinum, silver and even rice–was all a huge speculative fraud. Just another bubble.

  9. When gas was over $4 a gallon people drove less. They walked, rode bikes and used public transportation. They combined errands and didn’t make as many unnecessary trips. I would hope that people will still continue those habits even now that the price of oil and gas has fallen. What goes down must come up.

  11. All I know is I live in a Georgia town with no sidewalks or bike paths, and I just filled up for $16.50 – I’m feeling pretty good.

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