COLUMBUS, Ohio — 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.