With the world economy in the tank, why would the price of oil be falling?

I think it's fallen for 3 reasons that all work in the same direction.

1. Demand has been reduced do to a economic contraction but OPEC has met twice now to cut production, so reduced demand should have a more minimal effect on the price due to the production cuts.

2. Stronger dollar relative to other currencies due their own market instability has actually raised our purchasing power. (strange but true, the dollar has been doing well through the crisis even though we've created more money and increased it's velocity.)

3. With the credit crunch the market speculators have less money to try and play the middle man game with. Essentially, their are people who buy and sell commodities without ever actually buying or selling the commodity itself; they only trade paper sales. These people artificially inflate the commodities market and drive up the price (and make money in the middle). If they're having money constraints; they can't play the middle man game.

Just my two cents.

Gasoline and fuel oil are only one use for oil. Demand IS falling -- even for gasoline. And the prospects for future demand appear lower and lower as economic production contracts all over the world.

I know you said not to say it, but then you wouldn't get a correct answer, so here it is. Demand is falling...

I think the US just wants to make it seem like their bailout is working.

vote the girl above. great and honest answer. now thank your government.