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Hurricane Blows Up Oil Prices

Posted on: Tuesday, 30 August 2005, 09:00 CDT

OIL prices jumped above $70 a barrel for the first time yesterday as Hurricane Katrina caused oil production facilities to shut down.

The storm in an area crucial to US energy infrastructure sent the price of light, sweet crude for October delivery up by as much as $4.67 to $70.80 in electronic after-hours trading in Singapore.

The price later slipped back to around $69, but the higher level is certain to put further pressure on the cost of petrol, with the average monthly fuel bill for UK motorists already nearing pounds 100.

In some parts of the country, the average cost of unleaded stood at around 92p a litre last week.

Even before Hurricane Katrina bore down on New Orleans with 155mph winds, oil prices were under pressure from supply fears ahead of the winter.

Any threats to oil supply in key exporting countries tend to spark buying sprees because of fears that prices could soar even higher in the near term.

Oil companies have already evacuated workers and shut down more than 600,000 barrels of daily production in the Gulf of Mexico.

Refining capacity has also been affected, but analysts said the storm's potential damage to facilities was even more worrying.

The Gulf of Mexico normally produces 1.5 million barrels of crude oil a day, or about a quarter of the US domestic output.

Despite oil prices consistently hitting new highs, they are still below the levels seen during the 1980s when adjusted for inflation

Source: Daily Post; Liverpool

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