Crude oil has tumbled to a near six-and-a-half-year low this morning.
West Texas crude fell almost 4 percent to US$40.60 per barrel. It is now 50 percent below where it was a year ago.
The latest fall in prices was because of data showing there is even more crude oil stockpiled in the United States than analysts had expected.
The US Energy Information Administration says crude inventories rose by 2.6 million barrels to 456 million barrels in the last week. That compared with expectations of a decrease of 777,000 barrels.
Much like other commodities, like dairy, it is a case of too much supply and too little demand. When prices were last at these levels countries like China were stockpiling oil, but that is not happening this time.
In Europe, Brent crude for October delivery fell US$2 to $46.81 a barrel. That is the weakest Brent has been since January.
Prices are falling here at the pumps in New Zealand, with prices falling two cents a litre yesterday at Z Energy stations.
It means 91 octane is typically selling for just under $2.03 cents per litre. 95 octane is selling for just under $2.12 per litre. Diesel is retailing for just under $1.22.
But New Zealand pump prices are not falling at anywhere near the pace of the drop in crude oil prices.
There are a couple of reasons - the weakening New Zealand dollar and the international cost of refined fuel.
It is the refined fuel that New Zealand imports. Refined product has been trading for around US$75 a barrel. It's back to the levels it was trading for in April.
The AA says: "At that time retail petrol prices were around $1.93 per litre while the New Zealand dollar was worth 10c more. So current retail prices are on a par with that."
The AA says refinery prices are around 57 percent higher than the oil price, which adds an extra 27c or so to the cost of a litre of fuel. The AA says if the New Zealand dollar was worth the same today as it was at this time last year, retail prices would be under $1.80 per litre.
Globally there is a shortage of refinery capacity. BP had to take one of its big US refineries out of operation because of a mechanical fault. That added to a bottleneck at the refineries.
That bottleneck could get even worse, because from September US refineries start to slow down for annual maintenance.
Here is my talk with Paul Henry about oil and petrol prices.
The New Zealand dollar is higher this morning, breaking above 66 US cents It was 66.23 US at 8am.
The kiwi is buying 89.99 Australian. It is 42.20 pence, 81.95 yen and 59.49 euro.
It was a volatile day on Wall Street with concerns about China, the plunging oil price and the possibility of a hike in US interest rates.
Stocks managed to claw back some losses later in the day but still finished down.
The Dow Jones Industrial Average fell over 225 points by late morning. But it finished down 162 points, or 0.93 percent lower, at 17348 points.
The Federal Reserve released minutes from its most recent meeting. The notes suggest the Fed wants to see more economic data before it decides to lift interest rates from near zero levels. When rates are lifted it will be the first interest rate hike by the Fed in almost a decade.
The tech-heavy Nasdaq lost 40 points, or 0.80 percent, finishing at 5019.
The broader S&P 500 slipped 0.83 percent, or 17 points, to 2079.
China is also worrying American investors. The Shanghai Composite finished 1.24 percent higher yesterday. But at one point it was down four percent.
European stocks finished sharply lower, ahead of the release of the Fed minutes.
Germany's DAX lost over 2 percent, the French CAC40 fell 1.75 percent and the UK FTSE was down 1.88 percent.
German lawmakers approved the latest bailout package for Greece.
All this uncertainty is good for gold. It's up 1.38 percent to US $1132 an ounce.
Silver is trading almost 3 percent higher at US $15.22.
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