2008 Woodie Awards
Experts: oil prices will stay erratic
By Kevin G. Hall / KRT Campus Media Service
Issue date: 1/20/06 Section: News
Mounting unrest in oil-rich Nigeria and a brewing political showdown with Iran over its nuclear program sent crude oil prices surging Tuesday to three-month highs, as analysts warned that record oil prices may be coming soon.
On Tuesday the price of crude oil climbed to $66.30 a barrel at the close of trading on the New York Mercantile Exchange, the highest close since early October. Some analysts warn that prices could soon go past the all-time inflation-adjusted record of $70.85, set Aug. 30 after Hurricane Katrina.
Rising oil prices quickly translate into higher gasoline prices. The nationwide average price of regular unleaded gasoline stood Tuesday at $2.32 a gallon, according to the AAA motor club. That's up from $2.21 a month ago and $1.81 a year ago.
If last year's price fluctuations were unsettling, this year's may be worse. Here's why. The U.S. and Chinese economies-the world's top oil consumers-are expected to remain hot. That means the world's appetite for oil will continue to grow-by 2.2 percent in 2006 to 85.1 million barrels per day, according to the Paris-based International Energy Agency.
Available supply is drum-tight. Spare oil-production capacity remains around 2.6 million barrels per day-1.5 million barrels per day of it in the oil cartel known as OPEC.
Translation: Expect oil prices to stay high because there's not much wiggle room should production or exports fall off anywhere in the world.
"Add in a couple of political events and the markets are off to the races," said Philip Flynn, a vice president and energy trader for Alaron Trading Corp. in Chicago.
That's precisely what happened Tuesday, and Flynn expects the trend to produce record oil prices again this year.
"I think $70 a barrel is a lot closer than we think. I think we would have got to $70 a barrel without the political firestorm anyway," he said. "Obviously this (current) scenario gets to that quicker."
Last year's record gasoline prices of $3.05 per gallon were brought on by disruptions to oil production and refining after hurricanes ravaged the U.S. Gulf Coast. This year, it's geopolitics.
On Tuesday the price of crude oil climbed to $66.30 a barrel at the close of trading on the New York Mercantile Exchange, the highest close since early October. Some analysts warn that prices could soon go past the all-time inflation-adjusted record of $70.85, set Aug. 30 after Hurricane Katrina.
Rising oil prices quickly translate into higher gasoline prices. The nationwide average price of regular unleaded gasoline stood Tuesday at $2.32 a gallon, according to the AAA motor club. That's up from $2.21 a month ago and $1.81 a year ago.
If last year's price fluctuations were unsettling, this year's may be worse. Here's why. The U.S. and Chinese economies-the world's top oil consumers-are expected to remain hot. That means the world's appetite for oil will continue to grow-by 2.2 percent in 2006 to 85.1 million barrels per day, according to the Paris-based International Energy Agency.
Available supply is drum-tight. Spare oil-production capacity remains around 2.6 million barrels per day-1.5 million barrels per day of it in the oil cartel known as OPEC.
Translation: Expect oil prices to stay high because there's not much wiggle room should production or exports fall off anywhere in the world.
"Add in a couple of political events and the markets are off to the races," said Philip Flynn, a vice president and energy trader for Alaron Trading Corp. in Chicago.
That's precisely what happened Tuesday, and Flynn expects the trend to produce record oil prices again this year.
"I think $70 a barrel is a lot closer than we think. I think we would have got to $70 a barrel without the political firestorm anyway," he said. "Obviously this (current) scenario gets to that quicker."
Last year's record gasoline prices of $3.05 per gallon were brought on by disruptions to oil production and refining after hurricanes ravaged the U.S. Gulf Coast. This year, it's geopolitics.
