NEW YORK — Oil prices tumbled below $67 a barrel to 16-month lows Wednesday after the government reported big increases in U.S. fuel supplies — more evidence that the economic downturn is drying up energy demand.
The Energy Information Administration said crude inventories jumped by 3.2 million barrels last week, above the 2.9 million barrel increase expected by analysts surveyed by energy research firm Platts. Gasoline inventories rose by 2.7 million barrels last week, and inventories of distillates, which include heating oil and diesel, rose by 2.2 million barrels.
Over the last four weeks, the EIA said, motor gasoline demand was down 4.3 percent from the same period of last year. Distillate fuel demand was down 5.8 percent, and jet fuel demand was down 9.2 percent.
"The main theme here that's driving this market into new low ground is demand deterioration," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "As we begin to see evidence that demand is leveling — it doesn't have to increase, just level — then we can start discussing a possible price bottom. But it appears premature at this point."
Light, sweet crude for December delivery fell $5.43 to settle at $66.75 on the New York Mercantile Exchange, after falling as low as $66.20. It was the lowest close for a front-month contract since June 13, 2007, when crude settled at $66.26.
There has been a coinciding dramatic drop in gas prices. Nationally, a gallon of gas is 30 percent cheaper today than it was when prices peaked this summer. On July 11, a gallon of regular averaged $4.11. On Wednesday, it was $2.86. That's almost as cheap as the $2.82 of a year ago.
As lawmakers debate whether to send a second round of stimulus checks to Americans to lift the economy, the decline in gasoline prices could amount to as much as a $125 billion stimulus all by itself, according to calculations by Lawrence Goldstein, director of the Energy Policy Research Foundation Inc., which studies energy economics. That figure takes into account the amount of fuel used not only by drivers and households but also by businesses.
"We already have the equivalent of an invisible stimulus package going if (oil) prices bottom out in the $75 to $80 range," Goldstein said.