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Dismal economy sinks oil below $37

(Agencies)
Updated: 2008-12-19 08:48

Oil prices plummeted on Thursday on concerns the global economic downturn will be long and deep, while one of its main casualties, the US auto industry, faced White House talk of bankruptcy as part of a rescue by the government.

US crude fell 9 percent to a four-year low, near $36 a barrel -- despite dramatic cuts this week in oil supply by OPEC and in US interest rates, to near zero, by a Federal Reserve aiming to jump-start the economy.

OPEC oil ministers pose with Algeria's President Abdelaziz Bouteflika (5th from L) for a family photo after the opening of 151st Extraordinary Meeting of the OPEC in the western city of Oran December 17, 2008. Oil prices plummeted on Thursday on concerns the global economic downturn will be long and deep. [Agencies]

Oil has dropped 25 percent over five trading sessions amid the worst outlook for energy demand in a quarter-century.

Related readings:  OPEC decision helps oil recover  Oil tumbles below $40 as gloom persists  Oil up more than $1 before expected OPEC supply cut  OPEC to cut oil output as prices dive

The oil drop hurt energy stocks in Europe and the United States and helped push down the broader US market 2 percent.

A month-long production halt about to start Friday at Chrysler LLC, the most fragile of the Big Three US carmakers, added drama to the debate over government loans the industry seeks to avert near-term collapse of that company and General Motors Corp.

US President George W. Bush said he was worried about the impact a "disorderly bankruptcy" might have on markets, signaling that a managed bankruptcy might be part of an emergency financial lifeline.

Amid the mayhem and a month before he takes office, US President-elect Barack Obama told financial markets he would strengthen regulatory agencies and crack down on runaway "greeding and scheming" at the heart of bank failures, fraud and loose mortgage lending.

"We have been asleep at the switch," Obama told reporters in Chicago as he presented appointees to head the Securities and Exchange Commission and sit on the Federal Reserve board.

Worst Corporate Conditions

The day served up a litany of dismal economic data from Europe's big economies and dramatic cost-cutting measures from companies, even the profitable ones betting on a US recession stretching well into 2009.

Package delivery giant FedEx Corp, a bellwether of the US economy, announced $800 million in cost-cutting to cope with a grim 2009, including pay cuts and a suspension of matching contributions to its retirement plan.

"Our financial performance is increasingly being challenged by some of the worst economic conditions in the company's 35-year operating history," Chief Executive Fred Smith said.

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