HOUSTON — A sharp increase in oil prices on Wednesday sent shudders through anxious financial markets already worried about the prospect of a global economic slowdown.
Crude oil climbed above $144 a barrel before settling at $143.57, up $2.60 for the day. The Energy Department reported an unexpected decline in inventories, sending oil prices to a record. And now oil slowly is closing in on $150 a barrel, the next psychological milestone to be crossed.
The Standard & Poor’s 500-stock index fell 1.8 percent and the Dow Jones industrial average fell 166.75 points, or 1.5 percent, and is now down nearly 21 percent from its peak in October. A 20 percent drop in major stock indexes is considered the start of a bear market.
Shares in energy, materials and industrial companies led the market down. Analysts said the rapid rise in commodity prices had become a problem for both users and producers of raw materials and energy. Since reaching a new high on May 20, energy stocks in the S.& P. 500 have fallen 5 percent as crude oil futures have shot up 11 percent.
Recent data on industrial activity and driving habits suggest that higher prices are damping demand for commodities, especially energy, and slowing down the global economy. Shares of General Motors fell 15 percent, to their lowest level since 1954, after an analyst at Merrill Lynch said a bankruptcy filing by the automaker was “not impossible.”
Shares of Nucor, a steel maker, fell more than 14 percent as investors worried about weakening demand.
“As the energy price spikes higher, it’s crimping global growth further,” said Tobias Levkovich, chief equity strategist at Citigroup. “It’s starting to be a real challenge for global economies.”
The automotive group AAA reported that the average price for a gallon of unleaded gasoline on Wednesday rose to $4.09, a half-cent higher than the day before, almost 12 cents higher than a month ago, and $1.14 above the price of a year ago. The single largest component in the price of a gallon of gasoline is the price of crude oil.
It almost seems like ancient history since a single trader, apparently looking for bragging rights, bid up the price of crude over $100 by buying a small lot on Jan. 2 and then immediately selling it at a small loss. Political unrest, a cold winter and declining oil inventories were singled out as culprits for the jump past $100.
Since then, the prices of oil and gasoline have just kept rising. Over the last three months, the average retail price of unleaded regular gasoline was $3.75 a gallon, nearly 65 cents higher than the average price in the first quarter of the year, according to the Oil Price Information Service. The research group has estimated that Americans are now spending $1.6 billion a day on gasoline, which would make July the first month ever when the American gasoline bill would top $50 billion.
Tom Kloza, the group’s chief oil analyst, predicted that a barrel of oil would reach $155 by August and that retail prices for gasoline would rise to $4.25 to $4.50 a gallon for unleaded regular.
“The firecrackers are going off in the oil market and it will burn the U.S. consumers this holiday weekend,” Mr. Kloza said. He added that truckers stood to suffer most, noting that diesel prices rose 13 cents a gallon Wednesday afternoon in response to the Energy Department report.
“Diesel is the bullet with the most acceleration at the moment,” he said. “ You are going to see a lot of bankruptcies in the trucking business.”
Pushing up the price of crude are any number of factors, including continued instability in Nigeria, a partial strike at Venezuela’s state oil company and reports that Israel is considering an attack on Iran. Yet another reason for oil’s price climb came with the Energy Department’s weekly statistical bulletin, which showed that crude oil stocks had slipped by nearly 2 million barrels to below 300 million barrels.
Analysts say that level is psychologically important because crude oil stocks as recently as last year were above 350 million barrels. The inventory level was the lowest since January, and below what most analysts had expected. The crude oil inventory figure was 54 million barrels below a year ago, and nearly 22 million barrels below the five-year average, according to tabulations by Barclays Capital.
There was also some modestly good news in the report. Gasoline inventories rose 2.1 million barrels to 210.9 million barrels, an indication that gasoline demand is slackening a bit as drivers car-pool, buy more efficient cars, and use more mass transit when it is available.
But while the Energy Department report showed refineries increasing operations a bit, several experts cautioned that gasoline inventories traditionally come down in July and August. This year should be no different, they said, since refineries are having trouble making a profit on gasoline because gasoline prices have not kept pace with oil prices.
Weak profits in the refining business is one reason that energy stocks have been taking a beating, said Sam Stovall, chief investment strategist for Standard & Poor’s Equity Research. Shares in oil refining and marketing companies in the S.& P. 500-stock index are down more than 47 percent for the year.
In response to the rising cost of oil and gradually falling gasoline demand, refiners have been cutting their production rates for months.
“With the weakness in refinery margins, refiners have had no incentive to build crude oil inventories,” said Lawrence J. Goldstein, an energy analyst at the Energy Policy Research Foundation, a group backed by the oil industry. “In fact, they have been liquidating crude oil inventories. It means that the system is running on a tight basis.”
That tightness means higher gasoline prices even as the national demand for oil is easing for the first time in nearly two decades. The Department of Energy reports that gasoline demand for the week that ended June 27 was down 2.1 percent from the same week a year ago. In comparison, demand for distillate fuels, which include heating oil and diesel, was up nearly 7 percent.
“Supply is struggling to grow worldwide and the feeling is prices have to rise to choke off demand growth,” said Aaron F. Brady, an analyst at Cambridge Energy Research Associates, a consulting firm affiliated with IHS Inc. “I don’t see any barriers,” he added, to further price rises.
The sentiment for ever higher oil prices was summed up in a headline on a daily energy note written on Wednesday by Chris Ruppel, an energy analyst with Execution, an institutional brokerage firm: “Oil: $300 on the Radar Screen.”
Mr. Ruppel says he thinks the $300 price — what he calls “Iran war insurance” — is unlikely. But he said that investors bought nearly 2,000 call option contracts on June 27, permitting them to buy Nymex crude at $300 a barrel for December delivery.
“Those buying these options may want to trust Iranian assurances, but without verification they need the insurance,” Mr. Ruppel wrote.
Vikas Bajaj in New York contributed reporting.
