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Archive for Friday, July 14, 2006

Oil surges above $78 a barrel

July 14, 2006

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— Oil prices surged to a record above $78 a barrel Thursday in a market agitated by escalating violence in the Middle East and the threat of supply disruptions there and beyond.

The latest surge in oil shook stock-market investors' confidence, though economists said most U.S. consumers and businesses appear to be absorbing energy costs surprisingly well.

U.S. gasoline demand continues to rise in spite of near $3-a-gallon pump prices, core inflation remains relatively low and the U.S. economy is forecast to grow by roughly 3 percent in the second half of the year.

"Two years ago I might have said that $70 or $75 a barrel would be some kind of a tipping point. Now I'm not so sure anymore," said Nariman Behravesh, chief economist at Global Insight, a private forecasting firm.

Still, Behravesh said lower-income Americans are suffering disproportionately from higher energy costs and "I could certainly make a policy case for helping them out on a temporary basis."

Light sweet crude for August delivery settled at a new high of $76.70 per barrel on the New York Mercantile Exchange, then continued climbing in after-hours electronic trading, when volumes are significantly lower, to $78.35.

The previous Nymex settlement record of $75.19 was set July 5. The previous intraday record of $75.78 was posted two days later.

Adjusted for inflation, oil prices would need to rise to about $90 a barrel to exceed the highs set a quarter century ago when supplies tightened in the aftermath of a revolution in Iran and a war between Iraq and Iran.

Today, oil prices are being pushed higher by rising global demand and worries that the world's limited supply cushion would not be adequate to offset a lengthy disruption to output in major producing countries, such as Iran or Nigeria. There are also concerns about the risks hurricanes pose to U.S. production.

The surge in oil prices rattled stock market investors, sending the Dow Jones industrials sharply lower for the second straight day. Shares of Wal-Mart Stores Inc., the world's largest retailer, slumped 2 percent on the New York Stock Exchange on concerns that high energy prices are cutting into consumers' discretionary income.

Comments

tell_it_like_it_is 7 years, 9 months ago

Oh thats just great. Pretty soon we'll all be working just to pay for gasoline insurance and taxes.

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