Posted on 08/10/2005 5:54:24 PM PDT by B4Ranch
By BRAD FOSS
AP Business Writer
(AP) - Oil prices zoomed higher Wednesday, touching a new high of $65 a barrel, with buyers focused on refinery snags, shrinking U.S. inventories of gasoline and motorists' growing thirst for fuel despite record-high costs.
The latest rally _ crude futures have risen 14 percent in three weeks _ highlights just how nervous the market has become to output threats. It doesn't seem to matter, analysts said, that the country has enough fuel in inventory to offset routine supply disruptions.
The heightened sensitivity comes amid strong demand in the United States and China, the world's top consuming nations, where high prices have tempered rising fuel consumption only slightly.
"People talked about $60 crude slowing economies around the world. But here in the U.S., (Federal Reserve Chairman) Alan Greenspan is telling us the economy is doing great and getting stronger," said James Cordier, president of Liberty Trading Group in Tampa, Fla. "It bodes well for crude testing the $70 range."
Even so, Cordier said he has been stunned by the recent runup in oil and gasoline prices and the apparent lack of any response from motorists. Gasoline prices averaged $2.37 a gallon nationwide last week, up 49 cents from last year. Demand picked up by 1.4 percent from a year ago, according to government data.
Cordier said prices at the pump may continue climbing "until consumers are crying uncle, which they're not."
Light sweet crude for September delivery climbed as high as $65 a barrel on the New York Mercantile Exchange. The contract settled $1.83 higher at $64.90 a barrel, the highest level since Nymex trading began in 1983.
In other Nymex trading, gasoline futures jumped 7.39 cents to $1.8963 a gallon, while heating oil rose 6.22 cents to $1.8388 a gallon.
Natural gas futures also surged, rising 42 cents to close at $9.071 per 1,000 cubic feet. Traders attributed the runup in part on extremely strong demand from gas-fired power plants.
On London's International Petroleum Exchange, September Brent crude rose $2.01 to settle at $63.99 per barrel.
While oil prices are about 46 percent higher than a year ago, they would need to surpass $90 a barrel to exceed the inflation-adjusted peak set in 1980. That _ and the fact that the U.S. economy burns fuel much more efficiently than it did 25 years ago _ helps explain why the country's financial engine is still going strong, analysts said.
Energy markets have been extremely jumpy about a spate of refinery outages in recent weeks. Some traders said the recent U.S refinery troubles _ the latest reported by BP PLC on Wednesday _ is evidence the industry and its aging infrastructure are having difficulty maintaining output at high levels.
But analysts and industry officials said refinery snags are not out of the ordinary for this time of year, when plants run hard to meet peak gasoline demand.
"Hiccups are an unfortunate reality of operating refineries," said Bryan Caviness, who follows the industry for Fitch Ratings in Chicago.
"There have not been any more than what you typically see, but the impact (on prices) has certainly been greater than what you've seen in years past," he added.
A BP spokesman wouldn't comment on how much production would be lost at its Texas City refinery, though the unit that went down because of a leak has the capacity to process 80,000 barrels of fuel per day. The U.S. burns about 9.5 million barrels of gasoline a day.
Mary Rose Brown, a spokeswoman for San Antonio-based refiner Valero Energy Corp., said she has been getting calls from the financial media about minor production snags that in years past would not have received any attention. "Everybody's asking, so we tell," she said.
But Fitch's Caviness noted that "a side benefit" of refiners' willingness to talk about even the smallest production glitches is that it makes energy traders jumpy, and tends to push prices _ and hence refiners' profits _ higher.
The transition of power in Saudi Arabia last week following the death of King Fahd has also unnerved markets, as did the security-related closure of the U.S. embassy earlier this week in the world's largest oil-producing nation.
OPEC pledged Tuesday to pump more oil if needed, though the market has tended to brush off such talk. That's because worldwide demand is averaging some 84 million barrels a day. Excess production capacity is about 1.5 million barrels a day and the type of oil available _ sour crude _ is not the preferred variety for making transportation fuels.
Data released Wednesday by the U.S. Department of Energy showed that crude oil inventories grew by 2.8 million barrels last week to 320.8 million barrels, or 10 percent above year ago levels. The supply of distillate fuel, which includes heating oil, increased by 2.6 million barrels to 129.9 million barrels, or 6 percent above last year.
The agency data showed a 2.1 million barrel decrease in the nation's supply of gasoline, putting inventories at 203.1 million barrels, or 4 percent below last year.
U.S. refiners operated at 95 percent of capacity last week, a slight decline from the week before.
(Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.)
Still $23 per barrel (2005 $) lower than it was under Carter.
How much longer can this madness go on? It seems like the American Public would be crying "Uncle" by now.
That's because they can afford it and afford it easily.
The speculation is over... The companies involved are now trying to see how far and how fast they can push the envelope before eliciting a negative consumer response.
That's assuming the law of supply and demand hadn't been repealed by the left...
Yes, but the caribou are safe.
It seems like some would be cutting their elective driving, but a quick traffic count past my house indicates elective driving is actually increasing. If anything, the sound systems in the Silverados are turned up even higher. Lead Foot Louie is taking it somewhat easy for the time being, but he will be back up to speed if the price holds steady for a week.
This is ridiculous. Gas is pushing $2.50 a gallon here.....it costs me nearly thirty bucks to fill my damn tank. We could kick OPEC and the Chinese in the shorts if we expanded domestic production, but NOOOOOOOOOOOOOOOOOOOOOO (John Belushi-esque version), we have to listen to the eco Nazis and tie our economy to foreign sources.
Someone hold my hat while I puke.....
Environmental Laws make building refineries difficult, not impossible but difficult. That also means it takes years to get one built. Thank you Sierra Club, DNC, etc.
Looking more and more like a goal than a comparison.
The clean natural gas, uranium and coal resources of our western state basins are unbelievable. At least $100 trillion dollars in natural gas, uranium, coal resources and oil reserves out there could last US 300-500 years. With new refineries, it's a win-win scenario for US.
Bullseye! It seems that the only reason the price is going up is to see how far they can take it until we, the consumers, won't take it. Sadly, we probably haven't gotten near that point yet.
By controlling the supply you also restict the affordability of demand.
This is the best way to keep families from taking summer vacations over a few hundred miles from their place of residence. Just the idea of retiring and driving six or eight thousand miles in one summer have all but vanished for most folks.
I know people who have the super large motor homes. Yes, they are well to do but they are looking into the feasability of leaving their motor homes in Florida, Texas or Arizona over the summer months and driving the family car back and forth.
Diesel fuel is almost or over $3 a gallon today so the idea that we had five years ago of buying powered vehicles has gone out the window. I recall when diesel was a dollar less than gasoline. Locally here in Reno it is a dime more than gasoline.
The refinery process for diesel is much less than gasoline, so perhaps somebody can explain the cost rise above gas for me.
Maybe you should walk more places. That way you save money and can drop a few pounds while you're at it.
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