Energy prices also fell sharply during the fourth quarter. Oil prices fell from $30 per bbl at the beginning of the year to just $18.50 as the Organization of Petroleum Exporting Countries failed to win support for production curtailment. "We expect OPEC to reach some sort of agreement next year, but we still don't see prices going much above $20," says Bruce Cavella, an energy economist for DRI-WEFA, Lexington, Mass. Without an agreement, prices could go below $15, he says.
Natural gas also plunged this year, reducing cost pressure on many materials producers. Natural gas prices fell from $8.08 per million Btu last December to just $2.70 this month, says Ron Denhardt, DRI-WEFA's natural gas specialist. "There is a lot of volume and we are in the middle of a recession," he says. "We only expect prices to average around $2.80 next year."