Price of Oil Spills Over $67 a Barrel

Aug. 25–A drop in U.S. gasoline supplies and concerns about a tropical storm headed for the Gulf of Mexico, the site of valuable oil and gas production, pushed the price of oil to a new high — above $67 a barrel — Wednesday.

Traders drove crude prices higher because they are worried about supply disruptions at a time when demand is strong and supplies are disturbingly tight.

“We are dangerously close to the moment where demand exceeds supply,” said Keith Goddard, president of Capital Advisors Inc.

While world oil demand is averaging 84 million barrels a day, excess production capacity remains thin at about 1.5 million barrels. That’s not much protection against a major disruption in supply.

Oil futures surged $1.69 to an intraday high of $67.40 a barrel before finishing the day at $67.32, the highest closing price since trading began on the New York Mercantile Exchange in 1983.

Crude prices are 67 percent higher than this time last year.

“Oil prices will certainly go down from here at some point,” Goddard said. “The $40 to $60 range seems like a more realistic target for where oil ought to be in the long run.”

According to a report issued Wednesday by the Department of Energy, U.S. gasoline supplies fell by 3.2 million barrels last week to 194.9 million barrels, down 7 percent from last year.

In addition, Tropical Storm Katrina may reach hurricane strength later this week and is expected to enter the Gulf of Mexico. Some oil companies have shut down production facilities in the gulf as a precaution, The Associated Press reported.

“Everyone is nervous,” said Dale Steinkuehler, president of Ensaga Energy LLC, an energy investments and management firm in Tulsa. “The price of oil is going up because there’s just not enough to go around. There are a lot of factors that support it going higher.”

Thin refining capacity in the United States, continued unrest in the Middle East and exploding economies in China and India have pushed oil prices steadily higher over the last year.

Meanwhile, gasoline prices in Tulsa were holding steady at $2.47 to $2.49 a gallon at most places. The record high average for the Tulsa area is $2.51, set on Aug. 20, according to AAA.

The price Tulsa retailers are paying for wholesale gasoline closed at $2.405 a gallon, up 1.6 cents.

Statewide, the price of regular-grade gas is averaging $2.515 a gallon, up from $1.78 a year ago, AAA’s daily survey showed. The national average is $2.607 a gallon, up from $1.878 a year ago.

Pump prices could move higher as demand rises during the Labor Day weekend, which begins Sept. 2.

Natural gas prices also rose on fears of Tropical Storm Katrina. Natural gas climbed 16.7 cents to $9.85 per thousand cubic feet.

But while today’s high oil and gas prices squeeze consumers, they are a boon for Oklahoma, the nation’s No. 2 gas producer and No. 5 oil producer.

The higher prices lead to more drilling, more jobs and more tax revenue for the state, which collects a 7 percent tax on all oil and gas production.

The Oklahoma Energy Index, a measure of the economic impact of the state’s oil and gas producers, rose more than 1 point to a record 177.1 for June, the Oklahoma Independent Petroleum Association reported Wednesday. Officials attributed the improvement to higher prices, increased production and more drilling.

The price of Oklahoma sweet crude rose $1.75 Wednesday to close at $64 a barrel. The price Oklahoma producers receive for oil has risen 50 percent during the last year, the OIPA said. Natural gas prices in Oklahoma are up about 15 percent.

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