Posted on 05/21/2008 9:10:04 AM PDT by NormsRevenge
NEW YORK - Oil prices bolted to a new record above $132 a barrel Wednesday after the government reported that supplies of crude oil and gasoline fell unexpectedly last week. And crude's rise in the futures market again pressured consumers by pulling prices at the pump higher — a gallon of regular gas rose overnight to a new record above $3.80 a gallon.
With gas and oil prices setting new records on a daily basis, many analysts are beginning to wonder whether anything can stop runaway prices. There are technical signals in the futures market, including price differences between near-term and longer-term contracts, that crude may have already risen too high. But with demand for oil growing in the developing world, and little end in sight to supply problems in oil rich nations such as Nigeria, few analysts are willing to call an end to crude's rally.
In its weekly inventory report Wednesday, the Energy Department's Energy Information Administration said crude oil inventories fell by more than 5 million barrels last week. Analysts had expected a modest increase. Gasoline inventories also fell and took the market by surprise, while inventories of distillates, which include heating oil and diesel fuel, rose less than analysts surveyed by energy research firm Platts had expected.
Light, sweet crude for July delivery rose as high as $132.08 a barrel in late morning trading on the New York Mercantile Exchange before retreating slightly to trade up $2.75 at $131.73.
Investors seized on the inventory report to push prices higher Wednesday, but traders interested in pushing prices higher are increasingly picking and choosing which news they wish to pay attention to, analysts say.
"Just the slightest piece of bullish news will cause prices to surge," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos. But prices also rise when bearish news is reported, a sign that the market wants to move higher regardless, she added.
Crude prices first passed $130 overnight on concerns about demand and a weaker dollar. Analysts say crude has been boosted in recent days by especially strong demand for diesel in China, where power plants in some areas are running desperately short of coal and certain earthquake-hit regions are relying on diesel generators for power. The country is also increasing diesel imports ahead of the Olympics, analysts say, driving up prices.
The dollar, meanwhile, weakened against the euro Wednesday. Investors see hard commodities such as oil as a hedge against inflation and a weak dollar and pour into the crude futures market when the greenback falls. A weak dollar also makes oil less expensive to buyers dealing in other currencies.
Many investors believe the dollar's protracted decline over the past year has been the most significant factor behind oil's rise from about $66 a barrel a year ago to today's highs.
At the pump, meanwhile, the average national price of a gallon of regular gas rose 0.7 cent overnight to a record $3.807 a gallon, according to a survey of stations by AAA and the Oil Price Information Service. Prices are 60 cents higher than a year ago, and many forecasters believe they'll hit $4 on a national basis at some point over the next month.
"That's a fait accompli at this point," Rafield said.
Prices are already that high in many parts of the country, and the number of stations charging $4 or more rises each day.
Diesel fuel rose 1.9 cents to its own record of $4.558 a gallon Wednesday. Rising prices of diesel, used to transport most consumer and industrial goods, are sending prices of food and many other goods higher.
There are signs high prices are cutting demand for gasoline, which fell slightly over the past four weeks and has been mostly lower since January, according to EIA data. Only serious "demand destruction," a jump in supplies from Nigeria or other oil producing nations or a jump in gasoline output by U.S. refiners could stop prices from continuing to rise, Rafield said. There is little sign that demand will fall anytime soon in fast-growing China, India and the Middle East, she said.
Still, the price differences between the current, July crude oil contract and contracts for delivery of oil in later months signal a possible correction, or sharp price downturn, at some point, Rafield said. Whether, or when, that will happen is impossible to gauge.
In other Nymex trading, June gasoline futures rose 6.06 cents to $3.365 a gallon, and June heating oil futures rose 7.04 cents to $3.8454 a gallon. June natural gas futures rose 21.6 cents to $11.581 per 1,000 cubic feet.
In London, July Brent crude rose $3.37 to $131.21 a barrel on the ICE Futures exchange.
The liberals are fond of telling us that they feel our pain, they never mention that they enjoy watching it.
This is going to be big trouble for our economy. And count on truckers striking eventually. The small ones are losing their a**es.
Environmental lobbyists were telling Congress and the Federal government what could and could not be built thirty years ago. I doubt the situation has improved since then. Break the environmental lobby, and you will have energy. Let them run the government, and you will have higher prices for less and less energy. It’s that simple.
What incredible irony that, once again, reminiscent of the 9/11 commission, the ones who created the problem are the ones putting others on the hot seat to shift the blame.
Iago had it right. (in Othello)
Those who pass on fuel cost can keep going indefinitely. Those who eat their own fuel cost will not be driving much longer. Strike = nothing except possible calling out the troops
That’s 3.99 here in Utica.
Yikes!
The stupid GS troop is going to Sandusky overnight so I bring the minivan and dad is bring the truck and camper down to Cleveland..
Oh this is not going to be cheap.
Regardless that Congress has had since the 1973 oil embargo to address oil independence, history is repeating itself. So I'm keeping an eye on energy options.
Although I don't use this product, since people are starting to use bicycles more, people might be interested in this autoshifting bicycle.
Autoshifting bicycleAlso, I'm keeping an eye on developments in bio-fuel production.
First, the bad news about ethanol. Ethanol fires are evidently harder to control than gasoline fires.
Ethanol fires hard to control 1Hopefully, ways will be developed to make controlling ethanol fires easier.
Ethanol fires hard to control 2
On the brighter side concerning ethanol, there's now evidence that people might get as much, or more, bang per buck for their gas dollars with gas / ethanol mixtures.
Gas-competitive gas / ethanol mixturesAlso, I was surprised by the introduction of a machine (popularly known as a still) for making home-made ethanol.
EFuel100In stark contrast to the 1700 gallons of water required to make one gallon of corn-based ethanol as indicated by the OP, the EFuel100 uses only 170 gallons of water to produce 35 gallons of ethanol In other words, the EFuel100 uses less than 1% (about 0.2%) as much water as corn ethanol, under five gallons, to produce one gallon of ethanol.
But also note that the water used in the EFuel100 process does not take into account the water needed to grow the sugar that is used for this process.
And watch out for fines for violating biofuel regulations.
Fines for violating biofuel regulationsAlso, progress is being made in the development of other non-corn ethanol production technologies as well.
Non-corn ethanolFinally, I've also been hearing good things about biodiesel production but need to find some links.
“And count on truckers striking eventually.”
When stores can’t get food....
To quote an old phrase,”The next revolution is three missed meals away.”
$4.39/gallon for home heating oil. They just filled up my tank.
That better last me until Christmas.
Gee, that sounds like my house.............
Have fun at cedar Point and make sure you sit in the front car on the roller coasters.
"Professional hedgers who sell their production forward have never sold as much future production forward as they currently have," says Stephen Briese, the author of "The Commitments of Traders Bible."
Yet the ‘Rats STILL refuse to allow development of our natural resources.
Something has to happen; it’s reaching critical mass. Am I wrong here??
>>Have fun at cedar Point and make sure you sit in the front car on the roller coasters.<<
Trust me, I would if it were Cedar Point! We are going overnight at Great Wolf Lodge. I don’t do waterparks.
But seeing my family in Cleveland after is worth the price! And yesterday, Dad hooked up the camper and we took it for a spin around the block. It’s going to be GREAT! Pricey but great.
I operate a small trucking company. This morning two competitors announced they will opt out of trucking. As the competition falls that leaves me to be able to raise my prices to make a profit. (That along with the railroad’s new policy of not providing the markets I service) The oil futures are at $140 through 2012, so there’s no relief in sight. What will the market bear at this time? Business have to charge today for what prices will be tomorrow.
I may be the ‘last man standing’ (or not if Congress passes any type of tax ‘surcharge’, that’d be a killer. 4% off the top of gross revenues would be impossible to absorb in my profit margin)
“Yet the ‘Rats STILL refuse to allow development of our natural resources.”
Exactly, and it’s because their dependent on the environmental lobbies.
If I hear one more ignorant Demorat say high gas prices are because of “George Bush and his oil buddies” I'll put my shoe right in their A$$!!!
Don’t forget to take your jugs of ice. ( inside joke )
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