Price of Key U.S. Oil Dips Below $13 : Lowest Levels Since 1978 for West Texas Intermediate Crude

The price of the main grade of U.S. oil briefly plunged below $13 a barrel on Friday, a level last seen in 1978, and isolated instances of another 1970s phenomenon--gasoline price wars--started to emerge.

Saudi Arabia’s oil minister said that popularly traded crudes could drop to as low as $10 before bottoming out.

On the New York Mercantile Exchange, West Texas Intermediate crude for April delivery sank to $12.70 a barrel as trading opened Friday, then recovered somewhat to close at $13.26.

That still was 69 cents lower than Thursday’s close, 59 cents below the previous seven-year closing low recorded at the end of last week and 58.2% lower than the $31.70 a barrel that prevailed as recently as November.

The last time oil sold for less than $13 a barrel in the United States was mid-1978, according to Platt’s Oilgram Price Report, a newsletter specializing in petroleum prices.

The drop in oil prices has spurred new optimism about prospects for strong, non-inflationary economic growth.

With the reduction of risk for the resurgence of higher inflation, interest rates have plummeted on credit markets and stock prices have soared to all-time highs.

The decline in oil prices has kept record U.S. trade deficits from swelling even higher. The Commerce Department said Friday that the nation’s trade imbalance was a record $16.5 billion in January but that the cost of crude imports fell 4.5% despite a rise in the volume of petroleum products flowing into the United States.

Exxon, the world’s largest oil company, reported its 11th price cut of the year, dropping West Texas Intermediate to $18.75 from $20. As the year began, Exxon was paying $28 a barrel for the top domestic crude.

Texaco announced its eighth cut of the year, lowering West Texas Intermediate by $1 to $19 a barrel, and Amoco cut crude for the fifth straight week, lowering West Texas Intermediate by $1.25 to $18.75.