Crude Oil Hits 6-Month High
Oil futures prices hit a six-month high Monday and retail gasoline prices continued to rise, amid fears that escalating Middle East violence would squelch petroleum supplies.
The May contract for West Texas intermediate crude, the U.S. benchmark, bumped briefly above $27 before closing at $26.88 a barrel, up 57 cents, on the New York Mercantile Exchange.
The last time oil was this expensive was the week after the Sept. 11 terrorist attacks. Oil prices have jumped nearly 8% in the last week as a series of suicide bombings brought the biggest military response by Israel in decades.
Even before the escalation of the Israeli-Palestinian conflict, oil prices had been rising because of fears of a possible U.S. attack on Iraq.
“Crude oil supplies are not directly at risk due to the Israel- Palestinian conflict; however, there could be a spillover effect if more countries become involved,” said George Clemen, an analyst with Oil-gasoline.com.
Iraq called Monday for Arab states to use oil as a weapon to punish countries supporting Israel and to stop the Jewish state’s current military action against Palestinians.
At a news conference, Iranian Foreign Minister Kamal Kharrazi said any action by Iran would depend on the collective decision of Islamic countries.
“If they decide to use oil as a weapon, it would be very effective,” he added.
Motorists continued to pay ever-higher pump prices, and analysts see little relief ahead as the reviving economy keeps demand high and the summer driving season approaches.
The U.S. average price for self-serve regular gasoline reached $1.371 a gallon Monday, up 2.9cents from last week but down 7.1cents from a year ago, according to the Energy Information Administration’s weekly survey of 800 service stations.
Californians paid $1.592 a gallon on average, a 3.1-cent increase from last week. A year ago, the California average was 12.4 cents higher.
Los Angeles drivers saw prices rise 2.4 cents to $1.567 a gallon, and San Francisco drivers got a 5.8-cent increase to $1.632 a gallon, reported the EIA, the statistical arm of the Energy Department.
“California has plenty of gasoline physically, so the prices shouldn’t be going up, but the futures prices are going out of control,” said Mark Mahoney, an analyst with Oil Price Information Service, a Lakewood, N.J., company that tracks gasoline prices nationwide. “No one wants to be caught short in this market.”
California refineries do not use much oil from the Middle East, instead processing primarily Alaska and California crudes. Even so, the state’s gasoline market is being affected by movements in world oil prices, said Carol Thorp, spokeswoman for the Automobile Club of Southern California.
Pump prices in California generally are higher than those of other states because of the relative lack of competition in gasoline refining and marketing and because the state’s cleaner-burning gasoline, mandated by air-quality regulations, is produced by few refineries outside of California, Thorp noted.
Refinery problems and a switch to more expensive summer gasoline also boosted prices in the state, analysts said. But the unexpected problems have been fixed and most refineries are wrapping up routine winter maintenance.
“Gasoline prices are still below where they were a year ago, but they’re going up faster,” Thorp said. Prices in the Los Angeles-Long Beach area have leaped 60% since the beginning of the year, Auto Club surveys have found. In addition, national AAA surveys find more motorists planning road trips this summer, which could boost demand, further increasing the pressure on prices, she said.
“There are a lot of unknowns here,” Thorp said. The Auto Club is monitoring refinery production to determine whether refiners will keep up with demand or will produce at lower levels to keep prices high, she said.
Reuters was used in compiling this report.
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