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Oil At 3-Year Lows; Gas Below $2 In 23 States

COLUMBUS, Ohio (AP) - Oil prices on Thursday hit levels not seen
in more than three years and retail gasoline prices are now below
$2 across nearly half of the country on dour economic reports
suggesting a painful economic pullback.

Benchmark crude fell as low as $48.50 a barrel on the New York
Mercantile Exchange, levels last seen on May 18, 2005, when oil hit
$46.80 a barrel.

Meanwhile, prices at the pump fell again overnight nationally
close to $2 a gallon, with the average price in 23 states even less
than that.

"After this summer, this is wonderful ... wonderful," said
Anuj Dayal, a cab driver in New York's Hell's Kitchen neighborhood.
"I hope gas is $1 soon. I hope it's free."

Gasoline prices have been halved since reaching a record above
$4 in July, but relief from record crude prices have come amid a
global economic meltdown.

New claims for unemployment benefits jumped last week to a
16-year high and U.S. stock markets hit multiyear lows.

"Until we get past this malaise and gloom and doom, no one
wants to step up and buy this market," said Mike Zarembski, senior
commodity analyst at OptionsXpress.

The government said Thursday that new applications for jobless
benefits exceeded estimates of Wall Street economists, rising to a
seasonally adjusted 542,000 from a downwardly revised figure of
515,000 in the previous week. A survey of economists by Thomson
Reuters expected 505,000.

That is the highest level of claims since July 1992 when the
U.S. economy was coming out of a recession, according the Labor
Department.

The four-week average of claims, which smooths out fluctuations,
was even worse: it rose to 506,500, the highest in more than 25
years.

In addition, the number of people continuing to claim
unemployment insurance rose sharply for the third straight week to
more than 4 million, the highest since December 1982, when the
economy was in a painful recession.

Light, sweet crude for December delivery fell 7 percent, or $4,
to settle at $49.62 in Nymex trading.

Oil prices have fallen 66 percent since reaching a record
$147.27 a barrel in mid-July.

Oil analyst Stephen Schork wondered if $50 would even hold.

"Maybe $50 is too conservative given the putrid, putrid look at
the economy," he said.

"If we're not out of these doldrums nine months from now we're
looking at $30 oil."

Schork said he expects buyers of that December contract to put
the oil into storage and that inventories will continue to build.

The Energy Department's Energy Information Administration also
reported Thursday that natural gas storage levels far exceeded
expectations, driving prices sharply downward.

Natural gas inventories held in underground storage in the lower
48 states rose by 16 billion cubic feet to about 3.45 trillion
cubic feet for the week ended Nov. 14.

Analysts had expected little to no change in reserve levels,
according to a survey by Platts, the energy information arm of
McGraw-Hill Cos.

Gas prices fell 2.7 cents overnight to $2.02 a gallon, according
to auto club AAA, the Oil Price Information Service and Wright
Express.

The average price for gasoline is on pace to fall below $2
nationally by the end of the week.

The decline comes as motorists continue to drive less. The
Federal Highway Administration reported Wednesday that Americans
drove 10.7 billion fewer miles, or 4.4 percent, in September than a
year ago, the 11th straight monthly decline. Americans have now
driven 90 billion fewer miles over those 11 months than they did
the year before.

Rural interstate travel fell 8 percent in September and urban
interstate travel declined by 3.9 percent.

Global markets fell hard, and so did Wall Street.

The Dow Jones industrial average tumbled 440 points Thursday
after a 5 percent decline the day before.

Japan's benchmark Nikkei index fell 6.9 percent and Hong Kong's
Hang Seng index was off 4 percent. London's FTSE index was down 2.5 percent, Germany's DAX index lost 2.8 percent and France's CAC-40 shed 3.5 percent.

Also Goldman Sachs, which earlier this year predicted oil would
reach $200 a barrel, said Wednesday that it was discontinuing its
weekly energy report.

"The volatility in the past few weeks has mostly been to the
downside and the pressure on the oil complex has increased," the
report said. "In the near term, we do not expect significant
upside potential and as a consequence we are closing all of our oil
trading recommendations."

Goldman said it is moving to a near term price scenario of $50 a
barrel, but keep a price target of $107 by year end 2009.

In other Nymex trading, gasoline futures tumbled 10 cents to
settle at $1.0070 a gallon. Heating oil lost 8.38 cents to settle
at $1.6759 a gallon while natural gas for December delivery slid
42.7 cents to settle at $6.316 per 1,000 cubic feet.

In London, Brent crude fell $3.64 to settle at $48.08 on the ICE
Futures exchange.

---
Associated Press writers Pablo Gorondi in Budapest, Hungary,
Alex Kennedy in Singapore and Christopher S. Rugaber in Washington
contributed to this report.

(Copyright 2008 by The Associated Press. All Rights Reserved.)


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