Bright spot: As economy slides, so do energy prices

Amid those gloomy charts showing the financial turmoil around the world, there is one downward sloping graph that may provide some solace: declining energy prices.

The flip side of slowing economic growth is less demand for oil, natural gas and gasoline. And less demand usually means falling prices.

The frighteningly high prices of gasoline and heating oil have dropped significantly from their peaks this summer. Since July 14, the average price of gasoline has fallen 78 cents a gallon, or 19 percent, to $3.329 a gallon -- the lowest price since April.

Heating oil has declined $1.10 a gallon, or 23.2 percent, to $3.649 a gallon -- the lowest price since March.

"I think we're on a good slope," said Brud Waterman, operations manager for White Fuel Co., a heating oil dealer. "Hopefully, it will continue."

But even with the declines, prices are still well above where they were a year ago. Heating oil is 30 percent higher and gasoline is 23.3 percent higher than they were this time last year.

The U.S. Department of Energy has lowered its projection of heating costs for the coming winter. But the newest projection, released this week, still calls for a record-high heating season.

The average household that heats with natural gas can expect to pay $1,345 from October to March, an increase of $213 or 18.8 percent, the Energy department said.

"Even if it goes down a little more, it's still going to hurt people," Waterman said. "A lot of people are out of jobs. (The price) is still high."

The main factors behind the recent decline in energy prices are a drop in demand and slowing economic activity, the Energy department said.

This week the Energy Department reported unexpected increases in crude oil and gasoline inventories, which sent crude oil down even further. Light, sweet crude for November delivery fell $1.11 to settle at $88.95 a barrel on the New York Mercantile Exchange. The price has dropped 38 percent from its peak of about $143 a barrel in July.

And energy use is closely tied to economic growth.

"When the economy slows down, there's less economic activity," said Ross Levine, the James and Merryl Tisch Professor of Economics at Brown University.

But difficult economic times will also make it harder for many people to afford their heating bills.

"With the economy slowing ... and with unemployment rates going up, there will be more people in need this winter," said Mark Wolfe, executive director of the National Energy Assistance Directors' Association in Washington.

"It's not just the poor who are struggling with these bills," he said. "Lower middle-class families are having to make sacrifices to buy heating oil."

The federal government has doubled the amount of money available for heating assistance to $5.1 billion from $2.57 billion.

(E-mail Timothy Barmann at tbarmann(at)projo.com)

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)