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By Samuel R. Avro on Nov 25, 2008 with no responses

Cost of Gasoline Falls to 2004 Levels; Oil Tumbles

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Crude settles at $50 amid fears of a long U.S. recession

Oil prices fell nearly 7 percent Tuesday and gasoline prices fell to levels not seen since 2004 as a raft of lousy news about the economy, housing and the consumer state of mind suggested the U.S. is headed toward the worst recession in decades.

The government reported that the nation’s gross domestic product in the United States shrank 0.5 percent in the third quarter, which was worse than expected. It was the worst showing since the economy contracted 1.4 percent in the third quarter of 2001, during the last recession.

Consumers and businesses have pulled back on energy spending, with massive layoffs and cost-cutting across almost every sector. That means less money will go toward powering everything from industrial plants to automobiles.

The Paris-based Organization for Economic Cooperation and Development said Tuesday that economic output next year would likely shrink by 0.4 percent for the 30 market democracies that make up its membership, against the 1.4 percent growth prediction for 2008. That would be the worst global recession since the early 1980s.

After spiking Monday on news that the U.S. would bail out financial giant Citigroup, light, sweet crude for January delivery on Tuesday tumbled $3.73 to settle at $50.77 a barrel on the New York Mercantile Exchange.

In London, January Brent crude fell 6 percent, or $3.57 to settle at $50.35 a barrel on the ICE Futures exchange.

The New York-based Conference Board reported that while consumer confidence in the U.S. rose in November as gas prices fell, Americans’ views on the economy remain the gloomiest in decades amid widespread job losses, slumping home prices and dwindling retirement funds.

Gasoline prices nationwide continued to decline, falling 2.3 cents overnight to $1.885, their lowest levels since September 2004 when the average price for three days was $1.886, according to auto club AAA, the Oil Price Information Service and Wright Express. The current price is $1.20 below where it was a year ago and down $2.225 from the peak in July when prices hit $4.11 per gallon.

Article continues… MSNBC