Crude Oil Prices Top $44 a Barrel
Spurred by traders’ fears about tight supplies and shipment disruptions, crude oil prices surpassed $44 a barrel Tuesday to hit a record high for the third straight session.
The benchmark U.S. grade of crude gained 33 cents to $44.15 a barrel on the New York Mercantile Exchange. The value of crude on the exchange this year has soared $11.63 a barrel, or 36%, and Tuesday’s close was the highest since oil futures began trading in 1983.
But gasoline futures were little changed. In fact, despite the recent upward march of crude prices, retail gasoline prices have gone in the opposite direction.
The federal government said Monday that the average for a gallon of self-serve regular in California fell last week for the ninth consecutive week, slipping 3.4 cents to $2.128. Many service stations are selling regular for less than $2.05 a gallon and some for less than $2, according to CaliforniaGasPrices.com, a website that tracks pump prices.
There had been a widespread expectation that rising crude prices would, as usual, trigger gasoline prices to follow. Instead, a surge in refiners’ production of gasoline -- and some conservation by motorists -- has kept a lid on prices at the pump.
“We’re seeing the effect of $2 gasoline,” said Bob Van der Valk, bulk fuels manager for Cosby Oil Co. in Santa Fe Springs, who last week said gasoline prices might rise if crude remained above $42 a barrel. “Demand is just off.”
With oil fetching more than $44 a barrel, “we should have seen some firming” in wholesale gasoline prices Tuesday, he said, “but it isn’t happening.”
As both oil and gasoline prices rose earlier this year, refiners moved to capitalize on the trend by “increasing production as much as they could,” said Marshall Steeves, an analyst at Refco Group Ltd., a New York investment firm. “They’ve been producing near 97% of their capacity in recent weeks, which is extraordinarily high.”
There probably also has been some conservation by California drivers since Memorial Day weekend, when the average price of regular hit a record high $2.327 a gallon, Steeves said. That, too, could be helping nudge the price lower.
So “we’ve seen fuel stocks at seasonably acceptable levels,” he said. Indeed, in its weekly report on oil and gasoline last week, the Energy Department said gasoline inventories nationwide “remain near the middle of the average range” for this time of year.
The move has paid off handsomely for oil companies.
ChevronTexaco Corp., for instance, on Friday said its second-quarter profit more than doubled from a year earlier, to $4.13 billion, a boost that the San Ramon, Calif.-based company said it would use to find new oil.
Oil prices have soared this year because of strong demand worldwide, tight supplies and fears that oil flows will be interrupted.
There have been terrorist attacks in Saudi Arabia, sabotage of pipelines in Iraq and, most recently, financial problems at Yukos, Russia’s largest oil producer.
What’s more, the Organization of the Petroleum Exporting Countries -- which pumps about one-third of the world’s oil -- is producing nearly flat-out and might not be able to offset a major disruption in supplies elsewhere.
OPEC on Sunday boosted its production by 500,000 barrels a day, to 26 million, in an effort to tame the high prices, which the group acknowledges pose a threat to world economies. But the added supply failed to slow the rise of oil prices this week.
Now prices are poised to climb further into uncharted territory, perhaps reaching $45 a barrel, because the fears about disruptions -- exacerbated by this week’s heightened terrorist alerts -- aren’t likely to abate, analysts said.
“It’s all about perception right now,” said Steeves of Refco Group. “There hasn’t been any hard-and-fast [fundamental] catalyst for the run-up. We’re trading on momentum.”
Crude oil prices remain well below historic highs if adjusted for inflation. Oil traded for more than $30 per 42-gallon barrel in 1980-81, which would cost between $70 and $80 a barrel in today’s dollars.
