Crude oil is subject to forces
Like the gasoline price,
Which, when high, may suffice
That the market puts carts before horses.
A sudden, 8.6% plunge in the price of crude oil to $99.80 a barrel yesterday originated with a surprising source: the high price of US gasoline. Fears of an imminent "double dip" into recession have been fed by gas prices approaching $4/gallon. Oil, which - though the main ingredient in gasoline - is sensitive to economic cycles, was evidently poised for a break to the downside. All that was needed was a surprisingly bearish announcement, and the market got two: European Central Bank President Jean-Claude Trichet implied no imminent hike in euro interest rates, which strengthened the dollar; and new jobless claims were higher than expected, which weakened the US growth outlook.