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Oil price pushed to new records as US economy plunges further

Oil price pushed to new records as US economy plunges further

By Edmund Conway and James Quinn in New York

Last Updated: 11:56pm BST 06/06/2008



Dow crashes 400 points as US jobless rate climbs and prospects of war in Middle East grow, sparking worries of 1970s-style crisis 

Fears the world economy is in the grip of a 1970s-style oil crisis sparked an almost 400-point plunge in leading US shares, the biggest one-day loss in 16 months.

  Global fears push oil price to new records
The rise in crude oil will spark fears that the costs will soon be passed on to consumers throughout the developed world

The price of crude oil was catapulted $11.31 to a new all-time high of $139.12 in New York, its biggest one day gain in dollar terms on record, driven by an almost unprecedented rise in US unemployment and signs that Israel is preparing for outright conflict with Iran and on the Gaza Strip. 

The spike caused shares in the Dow Jones Industrials index to fall as much as 410 points at one stage, closing down 394.64 points at 12,209.81 – its worst loss since February 2007. In London the FTSE 100 closed down 88.5 at 5906.8.

On a dramatic day for equities and commodities, the New York Mercantile Exchange doubled daily price limits after heating oil contracts broke through original limits, leading to a short suspension of trading in some contracts.

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  • The oil price has now risen more than $15 in the past two days alone, having doubled in the last year, undermining predictions the commodities peak could be ending.

    Other commodities, including copper, aluminium and agricultural products, also rose sharply.

    “This is just a plain old stampede,” said Citigroup energy analyst Tim Evans.

    “The sellers have basically pulled their orders so it doesn’t take much incremental buying to push prices higher.”

    Kevin Norrish, a commodities analyst with Barclays Capital, said the oil spike represented Iran “coming back on to the radar screen.”

    “It’s a rather nasty reminder that it hasn’t gone away,” he added.

    A prominent Israeli cabinet minister, Shaul Mofaz, said that an Israeli attack on Iranian nuclear sites now looked “inevitable.”

    The rise in crude oil will spark fears that the extra costs will soon be passed on to consumers throughout the developed world, which is suffering its sharpest economic slowdown in some years.

    Morgan Stanley predicted an impending jump in oil prices as Asia’s appetite for Middle Eastern exports grows.

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    “We are calling for a short-term spike in oil prices,” said Ole Slorer, predicting crude would hit $150 early next month.

    Mr Norrish added: “The demand picture is still robust. The flow of data on non-Opec supply has been desperately poor.

    Against that backdrop, if you get something like this coming in as well, in the current environment that’s enough to get people quite worried.”

    US Labour Department data showed the number of Americans employed in so-called “non-farm” occupations fell by 49,000 in May, the fifth straight monthly fall.

    It pushed the dollar 1pc lower to $1.575 against the euro, with sterling gaining ground against the greenback, up 0.3pc at $1.9648.

    At the end of May, the US unemployment rate, which is calculated using a separate survey of households, stood at 5.5pc, up half a percentage point, its highest since October 2004.

    Wall Street economists had been expecting it to be 5.1pc. Equity markets were not helped by a new Standard & Poor’s report which said the number of companies around the world at risk of getting a credit downgrade climbed to a record in May, up to 738 from 713 in April.

    The report said: “A material slowdown in housing and consumer-related activity and protracted tightening of lending conditions have continued to dampen credit fundamentals.” and its also non-profit sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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