• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

Oil Prices at Record on Threats From Gulf Storms

Posted on: Thursday, 7 July 2005, 06:00 CDT

WASHINGTON -- Oil prices skyrocketed to a record Wednesday as storms Cindy and Dennis threatened U.S. oil production and imports.

Higher oil costs also led to increases in the price of gasoline and heating oil trading on New York markets to new records. And drivers soon will likely be paying record prices at the pump. The average U.S. regular unleaded retail gasoline price is just a nickel off the all-time high of $2.276 hit four months ago.

"We're going to smash that record by the weekend," says Tom Kloza, chief oil analyst at Oil Price Information Service.

The price of a barrel of crude oil rose $1.69, or 2.8%, to $61.28 Wednesday. That beat the previous record, not adjusted for inflation, of $60.54 set June 27. Adjusted for inflation, the record price for oil was set in 1981 at approximately $86 in today's dollars, according to the Energy Department.

Oil prices have been escalating for weeks as investors fret about the ability of energy supplies to meet rising worldwide demand. Investors focused Wednesday on storms Cindy and Dennis. While Cindy weakened, Dennis, which is expected to hit the USA in a few days, attained hurricane status. Such storms are seen as a threat to key U.S. oil production and refining operations along the nation's shorelines.

The U.S. Minerals Management Service said some 13% of regular U.S. daily oil production was not being tapped in the Gulf of Mexico because of Cindy. Approximately one-third of U.S. oil production comes from the Gulf of Mexico.

Wachovia energy economist Jason Schenker notes that not only is production at risk, but the ability to unload imports from tankers in Southern ports could be hampered by strong storms. Imports account for more than half of the oil and oil products consumed in the USA. "It's all about the weather," Schenker says.

Although higher energy prices sparked a sell-off in stock markets, economists have stressed that the increased costs appear to be having little effect.

"Oil may be above $60, but that doesn't seem to be doing much to the economy," Naroff Economic Advisors head Joel Naroff said in a note to clients.

Naroff pointed to a report from the Institute for Supply Management out Wednesday that showed a large jump in activity in June in the service sector, the biggest part of the U.S. economy. Friday, the institute said factory activity expanded at a healthy clip last month.

*Some mutual funds strike oil, 4B

Source: USA TODAY

More News in this Category