Friday, December 21, 2012

Oil drops as US 'fiscal cliff' approaches

(AP) ? Oil prices fell as much as $2 a barrel Friday as doubts intensified over whether political leaders in Washington could reach a deal on the budget before a package of tax hikes and spending cuts automatically kicks in with the new year.

In morning trading benchmark crude for February delivery fell $1.54 to $88.59 per barrel in New York. It was as low as $87.96 at one point.

In London, Brent crude, used to price international varieties of oil, fell 82 cents to $109.38 per barrel.

If Republicans and Democrats don't work out a compromise in the next 10 days, the U.S. could go over the so-called "fiscal cliff," a reference to hundreds of billions of dollars in tax increases and government spending cuts that take effect if a budget deal is not reached. Many economists fear that would eventually push the U.S. back into recession, a situation that would likely mean less energy demand.

Late Thursday House Republicans abruptly put off a vote on an alternative plan offered by House Speaker John Boehner that would prevent scheduled tax increases from taking effect on Jan. 1 on all income under $1 million. President Barack Obama wants the cutoff point to be $400,000.

On Friday morning, Boehner signaled talks are still open.

In other energy futures trading on the New York Mercantile Exchange:

? Natural gas rose 2 cents to $3.48 per 1,000 cubic feet.

? Heating oil fell 2 cents to $3.02 a gallon.

? Wholesale gasoline fell 2 cents to $2.73 a gallon.

Associated Press

Source: http://hosted2.ap.org/APDEFAULT/f70471f764144b2fab526d39972d37b3/Article_2012-12-21-Oil%20Prices/id-c4873c4c6b55476787dcdb196332ab99

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