Oil prices climb to record above $75

[nickel]

Oil prices climb to record above $75
AP Business
12 minutes ago

WASHINGTON - Oil prices jumped to a record above $75 a barrel on Wednesday, propelled by a rally in gasoline that analysts said could send average U.S. pump prices past $3 a gallon by the weekend.

Recent snags in oil-shipping and refining along the Gulf Coast have raised traders' concerns about motor-fuel supplies at a time when demand continues to rise despite soaring prices. The start of a new fiscal quarter also has brought more speculative money into the market, brokers said.

"Everybody thought we'd hit a price that would create permanent demand destruction. But demand for gasoline is rising," said Alaron Trading Corp. analyst Phil Flynn. "Once again the American public has shown its ability to get over paying high prices for gasoline."

A protracted diplomatic standoff between the West and Iran, OPEC's No. 2 oil supplier, has kept a high floor beneath prices, and analysts said geopolitical tensions were heightened further on Wednesday by North Korea's test-firing of missiles.

Light sweet crude for August delivery briefly surged to $75.40 a barrel on the New York Mercantile Exchange before easing back to settle at $75.19, an increase of $1.26. Gasoline futures jumped by more than 5.7 cents to settle at $2.2758 a gallon, heating oil closed at $2.0626 a gallon, up 3.4 cents.

With refiners fetching the equivalent of $95 a barrel or more for gasoline — there are 42 gallons in a barrel — "one doesn't have to be disciplined in the buying of crude," explained Tom Kloza, an oil analyst at Oil Price Information Service in Wall, N.J

The previous intraday record for front-month oil futures was $75.35, set on April 21. The previous record settlement for oil, $75.15, was set the same day.

Oil prices are now roughly 26 percent higher than a year ago, but still below all-time inflation-adjusted highs of around $90.

The average retail price of gasoline is $2.93 a gallon, according to OPIS. But Kloza said pump prices are likely to surpass $3 a gallon as early as this weekend.

U.S. retail gasoline prices peaked at $3.07 a gallon, on average, last September, reflecting the extreme tightness in the market following Hurricane Katrina, which knocked out pipelines that deliver fuel to the East Coast and Midwest.

While oil prices are on the upswing, natural gas futures continue to head lower amid record levels of domestic supplies. Some analysts say domestic storage could reach its limits by the end of summer, forcing some producers to cap wells. On Wednesday, August natural gas futures fell 33.9 cents to settle at $5.765 per 1,000 cubic feet — the lowest level since Sept. 28, 2004.

But with global oil demand approaching 85 million barrels per day, traders are extremely nervous about the possibility of any supply disruptions, especially because there is less than 2 million barrels a day of spare production capacity, most of it in Saudi Arabia.

North Korea defied stern warnings from the United States and Japan to launch six missiles early Wednesday, including a long-range Taepodong-2, which failed shortly after takeoff. Later Wednesday, the communist nation fired a seventh missile.

While the news was unlikely to have any impact on supply, it adds to uncertainties about the global political situation, analysts and traders said. Markets already have been jittery about Iran's nuclear program and violence in Nigeria and the Middle East.

Iran postponed by a day its talks with the European Union on a package of incentives designed to defuse the standoff over Tehran's atomic program, the EU said Wednesday.

In London, Brent crude futures rose 55 cents to $73.06 a barrel on the ICE Futures exchange.

"This market has got some fireworks," said BNP Paribas Commodity Futures broker Thomas Bentz.

"The market just always seems to react to any political unrest," Bentz said.

Bentz said reduced rates Monday at a gasoline producing unit of an Exxon Mobil Corp. refinery were not a big deal for actual supply, but nevertheless had a psychological impact on the market.

"The bulls just seem to have plenty of fodder to sustain ever higher prices," Fimat USA oil analyst John Kilduff said. Kilduff said a severe disruption in oil supplies from a hurricane or some other event could send oil racing toward $90 a barrel. On the other hand, if the diplomatic standoff between Iran and the West were to be resolved, that could take oil prices sharply lower.

The Department of Energy is scheduled to release its weekly petroleum report Thursday, a day later than usual due to the Independence Day holiday. With demand about 1 percent above year ago levels for the past month, analysts expect to see commercial inventories of gasoline decline for the second straight week.
http://news.yahoo.com/s/ap/20060705/ap_on_bi_ge/oil_prices

are you doing anything to conserve gas? the article claims "demand continues to rise despite soaring pices."

i am car pooling more. i am thinking my errands out so i can complete a few instead of one per trip.
my mother and i call when we are going to the store to ask if we can save the other a trip and pick something up we might need.

but yet... i am not giving a second thought to leisure time. if i want to go somewhere for a vacation, a party, or canoeing, etc., i just go.

anyone see themselves driving one of these Smart Cars?
http://class.ee.iastate.edu/rmander/BobAnderson/Photos/2001-09%20Med%20Cruise/Images%20Rome/Rome-10%20Smart%20Car.JPG
Chyrsler is going to market them in the U.S. soon. they get like 40 mpg.
http://seattlepi.nwsource.com/business/1310AP_DaimlerChrysler_Zetsche.html?source=mypi

[MikeD]

I don't use much gas, so to answer your question: no, I'm not doing much to conserve. Then again, I don't use much either. :shrug:

If I was using more (i.e., longer commute, bigger engine), then I'd probably implement some conservation steps.

$75 a barrel to convince the American public to change its ways? That's laughable...it will take much, much higher prices before that will happen.

Frankly, I'm surprised it's stayed under $3/gallon near my house. I thought we'd be closer to $4 by now.

[zero2dash]

There's not much a lot of people can do; you either pay or you don't go anywhere, and either way you're screwed.

I basically drive straight to work and straight home afterwards. If I have shopping to do, I usually do it on the way home. (Luckily I work probably 4 miles from my home, so it's not a huge burden on my gas tank.)

Cars like that won't do much for anyone either because we're still relying on gasoline. Many cars nowadays (including mine) average 30-35mpg city/highway, so adding another 10 won't do much. IMO we're in a catch-22 here with fuel prices and the auto industry (and our government which has its hands in "big oil's pockets").

Seems like the auto industry is trying to come up with alternative methods, but they're having a hard time doing so, probably because the oil companies are throwing money their way saying "take a long time, let the public rely on our fuel instead". Then you also have the reluctance to see these alternative fuels at filling stations (ie here in St. Louis, I know of only a handful of stations that have E-85 and I can count them on one hand).

Until we start either a) relying on less (which won't happen under the current conditions and the current automotive market, with the current people "in power" in the government) or b) drilling in our own country - I think we're pretty much in a stalemate with no end in sight. :disa: It's really f'n ridiculous but...what can you do?

All I know is the next vehicle I purchase may be a diesel Ram.

[Cubsfan]

I work about a mile from my house, so while I should ride my bike, I'm also not using much gas.

Gas isn't THAT bad around here. I just paid $2.65 in Wyoming this weekend.

[zippyjuan]

Colorado is usually forty cents a gallon less than San Diego. The prices have not gone up enough to get people to make any serious changes in their habits. They are complaining but not doing much different yet. Using a card to pay also deflects the impact of price- they don't pay attention to the numbers, just swipt the card and go. You complain when you see the bill at the end of the month but don't make the connection to where it happened. If you had to pay cash each time, you would be more aware of how much it costs you. I measure my usage in miles per gallon- of sweat on my bicycle instead of a car.

[LegendKiller]

Cars like that won't do much for anyone either because we're still relying on gasoline. Many cars nowadays (including mine) average 30-35mpg city/highway, so adding another 10 won't do much. IMO we're in a catch-22 here with fuel prices and the auto industry (and our government which has its hands in "big oil's pockets").


That's actually quite incorrect. Average is ~22mpg. For most people, getting 40+ in a Smart would automatically half their costs. Figure SUVs in that equation and a shift (SUVs go to light suv or sedans, sedans go to smaller or hybrid, hybrid or others go to smart) upwards in the spectrum, you could easily see average mpg hitting 30+, that would translate into huge shifts in demand since the distribution is hugely skewed.

If every American drove a 40+mpg car, we'd cut our fuel needs by ~33%, which is massive when considering we consume something like 11 billion barrels a year, cutting that down to 7.26bbl is massive and would cause a huge shift in the oil markets. Probably a 20% decline.

Not to mention that if the political situation gets calmer would would see a large decrease due to reduced risk.

[brainsmile]

yeah... I'd say that the average car gets <25 MPG simply cause everyone drives like idiots :)

But with that said I would love to have a hybrid but I'm still not driving enough to warrant the higher cost even with the tax break.

[surfer]

I ride my bike to work and if I only need a few things I pick them up on the way home.

[Luc13n]

A friend was tellin me there is a mod that some folks with hybrids can do. They have to install bigger batteries, but they can tweek out 60+ miles per gallon. It was mentioned that Honda and Toyota could sell them like this but they would increase the cost of the cars $5k. With the hybrid rebate, it may be more fesible to save money and gas.

[MikeD]

That's actually quite incorrect. Average is ~22mpg. For most people, getting 40+ in a Smart would automatically half their costs.

Well, it may halve their fuel costs. What about maintenance costs, though? Are hybrids more expensive to maintain / repair than your average Ford / GM sedan?

Just wondering, playing devil's advocate. :shrug:

[speedracer120]

I actually read somewhere that in the US the hybrid setting have been adjusted from the rest of the world to ensure longer battery life for some warranty reasons whereas in Europe and Asia they rely more on the batteries and less on the gasoline at the lower speeds.

[clutchy]

i want a civic gx...

[LegendKiller]

Well, it may halve their fuel costs. What about maintenance costs, though? Are hybrids more expensive to maintain / repair than your average Ford / GM sedan?

Just wondering, playing devil's advocate. :shrug:

The savings are multiplicative. Not only do you use half as much, but in cutting that down by half you are also reducing the price, so your fuel costs may be 30% of what they were before. Add in the social benefits and that number becomes huge.

The key there is, don't buy a piece of crap. If Ford/GM can't cut it, buy a "foreign" car.

[MikeD]

The savings are multiplicative. Not only do you use half as much, but in cutting that down by half you are also reducing the price, so your fuel costs may be 30% of what they were before. Add in the social benefits and that number becomes huge.

The key there is, don't buy a piece of crap. If Ford/GM can't cut it, buy a "foreign" car.

The maintenance costs are still are unknown. And we're still assuming that us (i.e., the United States) using less will cause these dramatic effects on prices. While it will help, you have to factor in the rising demand in other parts of the world (China, India, etc.).

I'm not saying we shouldn't pay attention to our consumption levels or "do the right thing" environmentally speaking. I agree 100% with the social aspect argument.

I am saying we should be realistic about oil, long term. We can mitigate the problem, but should be realistic about what we can expect our neighbor to do, and what the rest of the world will do / need as well.

[LegendKiller]

The maintenance costs are still are unknown. And we're still assuming that us (i.e., the United States) using less will cause these dramatic effects on prices. While it will help, you have to factor in the rising demand in other parts of the world (China, India, etc.).

I'm not saying we shouldn't pay attention to our consumption levels or "do the right thing" environmentally speaking. I agree 100% with the social aspect argument.

I am saying we should be realistic about oil, long term. We can mitigate the problem, but should be realistic about what we can expect our neighbor to do, and what the rest of the world will do / need as well.

We consume 20 million barrels per day, China, the next closest, consumes 6.3 million, Japan at 5.5, and then Russia at 2.8. If we dropped down to, say, 12 billion, that would be cutting *ALL* of china out of the equation plus almost half of Japan. That impact on world supply would be *MASSIVE*. You are literally doubling the supply to the next largest user and then increasing, by 50%, Japans availible.


http://www.nationmaster.com/graph/ene_oil_con-energy-oil-consumption


Repair costs aren't too bad from what my boss says.

[MikeD]

Fair enough. :shakehand

Nice chart. Where is Niue, and what are they wasting 20 barrels a day on?

[BigJon]

Already getting $3.05 here for regular...about the highest we've seen here in Ohio. :disa: