Oil keeps rising
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From Times staff writer Martin Zimmerman:
Another day, another benchmark.
Oil prices soared above $125 a barrel today, closing at $125.96, up $2.27 a barrel, in New York trading. It was the sixth straight daily increase.
Analysts noted that there were no dramatic developments behind the latest upward move. But oil prices have jumped more than 30% this year and almost 12% since May 1, convincing many investors that the momentum play in crude futures shows no sign of slowing.
“We blew through $115, $120 and $125,” said Andrew Lipow, a Houston energy consultant. “With that kind of price movement, people don’t even want to sell anymore because they see it just keeps going up and that kind of feeds on itself.”
The speculative fever around crude has even given rise on Wall Street talk of a new “super spike” that could push prices to $150 or even $200 a barrel.
The recent price increases are making their way to the gasoline pump, where motorists are already seeing record prices. The statewide average price for regular unleaded in California is now at $3.929 a gallon, AAA reported today. That’s up from $3.746 a month ago and $3.486 at this time last year.
Besides speculation, other factors behind oil’s recent rise include growing demand in nations such as China and India, which is keeping worldwide supplies tight despite signs of slackening demand in the U.S.
The weakening dollar has also been a factor, in part because crude is priced in dollars, making it more attractive for many overseas investors. The European Central Bank said it is unlikely to cut interest rates, which would help strengthen the dollar against the euro.
Geopolitical factors have also played a role. Concerns that the U.S. may impose sanctions against Venezuela, one of its biggest suppliers, have added to the upward pressure on prices.
Although gasoline supplies are stabilizing, the U.S. government reported this week that supplies of other crude byproducts such as diesel fuel and heating oil are down. That’s bad news for truck drivers, who are paying a record $4.521 for a gallon of diesel in California, according to AAA.
Absent a sharp rebound in the dollar or a significant buildup of supplies, it may take a painful economic slowdown in the U.S., Europe and Japan to put a serious dent in petroleum demand and bring down crude prices, Lipow said.
And that, he notes, isn’t exactly a comforting thought for consumers.
“It’s not a pretty picture,” he said.
Money & Co. blogger Tom Petruno is on vacation this week. He returns Monday.