Price of Crude Oil Dips Due to US Debt Downgrade

There’s no denying that the world stock markets have got the 2008 jitters, as Dow Jones looks to open more than 200 points below Friday’s close and Gold is reaching for ever higher levels. However, the world of public finance, that only had contact with the automotive world when the US government loaned a bunch of money to the stricken automakers, has some new and unforeseen results in the automotive world.

Yahoo! Finance reports today that the price of oil dipped below $85 a barrel in Asia trading, after Standard & Poor's lowered the U.S. credit rating, raising doubts regarding the sturdiness of the recovery and future economic prospects.

Oil plunged after Standard & Poor's announced Friday it was lowering its rating for U.S. debt from AAA to AA+. The price of barrel of crude has dropped from $100 last month and near $115 in May, and is now at levels that could result in OPEC cutting production.

"A drastic weakening of sentiment has brought oil prices down sharply, with sovereign debt fears key in a mounting loss of faith in economic, and hence demand, prospects," Barclays Capital said in a report.

So will the reduced price of oil translate to savings at the pump? Well, not likely, as the levels were way below the high of about $150 from a couple of years back.

However, if the economy is affected by a new crisis, the more expensive fuel-sipping technologies like hybrids and electric vehicles will become less attractive, as credit and government subsidies dwindle.

According to Yahoo! Finance, in Nymex trading for the September contracts, gasoline dropped 6.4 cents at $2.74 a gallon. Natural gas futures slid 4.9 cents at $3.89 per 1,000 cubic feet.