Oil price drops below $80 for first time since October

Friday, June 15, 2012, Vol. 36, No. 24

NEW YORK (AP) — The price of oil fell nearly $3 on Thursday to dip below $80 for the first time since October.

Benchmark U.S. crude fell $2.95, or 3.6 percent, to $78.50 per barrel in afternoon trading. That's the lowest level since Oct. 6.

The price has fallen as the world economy slows. America isn't creating as many jobs as hoped earlier this year, Europe faces another recession and manufacturing activity in China appears to have slowed.

On Thursday, reports out of China and the U.S. both pointed to a slowdown in manufacturing activity. Platts, the energy-information arm of McGraw-Hill Cos. also noted that China's oil demand rose less than 1 percent in May, the second-smallest increase this year.

Meanwhile analysts say investors are disappointed that the Federal Reserve didn't announce more aggressive moves to stimulate the U.S. economy after its meeting this week. The Fed will extend an existing program to lower long-term interest rates, but it doesn't plan to pump more money into the economy as it has previously.

The drop in oil prices has made gasoline cheaper this summer for U.S. motorists. The pump price fell to a national average of $3.472 per gallon (91 cents a liter) Thursday, according to AAA, Wright Express and Oil Price Information Service. That's down 46 cents (12 cents a liter) from its peak in early April.

Natural gas prices jumped more than 3 percent Thursday after the government said that the nation's supplies didn't grow as much as expected last week. The Energy Information Administration's report said the U.S. was holding more than 3 trillion cubic feet of gas in storage facilities. That's more than 27 percent higher than average for this time of year, but a little less than what analysts expected.

Natural gas futures rose 6.5 cents to $2.582 per 1,000 cubic feet in New York.