Oil Hits Record High Prices
By Russell Ray, Tulsa World, Okla.
Apr. 18–Oil prices surged above $70 a barrel Monday to close at a record high as unrest from abroad fueled fears of a major supply disruption.
Wholesale gasoline futures, an indication of where pump prices are headed, also jumped more than 6 cents a gallon to $2.17 excluding taxes, the highest since late September.
Analysts say it’s a story line that could lead to higher prices for consumers.
Oil rose $1.08 to settle at $70.40 a barrel, the highest closing price ever, on the New York Mercantile Exchange.
Oil prices could move even higher due to a worrisome combination of tight oil supplies and strong global demand, said Jeramy Rich, president of the Oklahoma Independent Petroleum Association.
"Both of those are simply a formula for higher prices," Rich said.
Prices haven’t risen high enough to curb the world’s ravenous consumption of oil, Rich said.
"We’ve seen some estimates that American demand has leveled off, but we are not seeing that worldwide," he said.
Crude oil prices are 37 percent higher than this time last year.
With just 2 million barrels of spare production capacity per day worldwide and global demand projected to average 85 million barrels a day in 2006, the gap between supply and demand is thin.
Rich said he isn’t expecting any permanent improvement in the world’s supply cushion.
"Things could change on the supply side, but long term I don’t believe they do," he said.
What’s more, growing concerns about supply disruptions in Nigeria, Iran and other large oil-producing nations have created a nervous oil market suited for high prices.
Fear of military action against Iran and its alleged effort to develop nuclear weapons were blamed for Monday’s price rally. Militant violence in Nigeria, where more than 500,000 barrels of daily production capacity has been disrupted, also drove prices higher Monday.
Meanwhile, the price of regular unleaded gasoline is averaging $2.78 a gallon nationwide, up 55 cents from a year ago, the Department of Energy reported Monday.
The dominant retail price in Tulsa was $2.57 a gallon late Monday.
But another increase in local pump prices could be looming because the average price of wholesale gasoline sold in the Tulsa area jumped 2 cents to $2.55 a gallon Monday morning.
The Department of Energy, in a report released last week, said this summer could be the most expensive ever for drivers.
The agency said pump prices this summer would average about $2.62 a gallon, 25 cents higher than last summer.
Pump prices in Tulsa topped $3 a gallon after last year’s hurricanes knocked out refining capacity in the Gulf Coast region. Prices could again rise to $3 a gallon this summer if another major disruption in oil supplies occurs, the DOE report stated.
The price of Oklahoma sweet, the state’s most abundant grade of crude oil, rose $1 to close at $67 a barrel.
Although higher oil and natural gas prices are pinching Oklahoma consumers, they have improved the state economy by creating more jobs and more tax revenues, Rich said.
The number of exploration and production jobs in Oklahoma grew by 5,200 last year, Rich said.
Russell Ray 581-8380 russell.ray@tulsaworld.com
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Copyright (c) 2006, Tulsa World, Okla.
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