Fear Of U.S.-Venezuela Conflict Pushes Oil To Record $126 Per Barrel
NEW YORK (AP) – Oil rose above $126 a barrel for the first time today, bringing its advance this week to nearly $10, as investors questioned whether a possible confrontation between the U.S. and Venezuela could cut exports from the OPEC member. Gas prices, meanwhile, rose above an average $3.67 a gallon at the pump, following oil’s recent path higher.
On Friday, The Wall Street Journal published a report that suggested closer ties between Venezuelan President Hugo Chavez and rebels attempting to overthrow Colombia’s government. Mr. Chavez has been linked to Colombian rebels previously, but the paper reported it had reviewed computer files indicating concrete offers by Venezuela’s leader to arm guerillas. That appears to heighten the chances that the U.S. could impose sanctions on one of its biggest oil suppliers.
“If we put on sanctions, I’m sure Chavez would threaten to cut off our oil supply,” said Phil Flynn, an analyst at Alaron Trading Corp. “Obviously that would have a major impact on oil prices.”
Light, sweet crude for June delivery vaulted to a new record of $126.20 in morning trading on the New York Mercantile Exchange before retreating to trade up $1.28 at $124.97 a barrel.
Even if Mr. Chavez cut oil shipments to the U.S., Venezuelan oil would still make its way to the U.S. via middle men, who would buy it from Venezuela and resell it to the U.S., Mr. Flynn said. But that new layer in the supply chain would bump up costs.
Oil prices also were boosted Friday by the dollar, which declined against the euro. The European Central Bank said it was unlikely to consider interest rate cuts to cool the strong euro against the slumping dollar. Investors often buy commodities such as oil as a hedge against inflation when the greenback falls. A weaker dollar also makes oil less expensive to overseas investors.
Many analysts believe the dollar’s protracted decline has much to do with the doubling in oil prices since this time last year. Another school of thought thinks tight global supplies of oil, driven by growing demand in countries such as China, Brazil and India, is the primary factor driving oil higher.
Oil’s surge is pushing retail gas prices higher. The national average price of a gallon of regular gas jumped 2.6 cents overnight to a record $3.671 a gallon according to a survey of stations by AAA and the Oil Price Information Service. The Energy Department expects prices to peak at a monthly average of $3.73 in June, though many analysts say national average prices could rise as high as $4. Consumers in many regions, including parts of California and Hawaii, are already paying that much.
Demand for diesel fuel is also growing worldwide, but supplies of distillates, which include diesel and heating oil, fell unexpectedly last week, the Energy Department said Wednesday. That’s pushing U.S. diesel prices to record highs and inflating heating oil prices in the futures market; heating oil futures are often viewed as a proxy for diesel.
Heating oil for June delivery rose 7.15 cents to $3.5813 on the Nymex after earlier setting a trading record of $3.6125. At truck stops, retail diesel prices rose 1.8 cents overnight to a record national average of $4.269 a gallon,
Diesel is used to move most of the world’s food, consumer and industrial goods via truck, ship and rail. Skyrocketing diesel prices are part of the reason food and consumer goods prices are so high.
In other Nymex trading today, June gasoline futures rose 3.92 cents to $3.177 a gallon, and June natural gas futures rose 14.8 cents to $11.411 per 1,000 cubic feet.
In London, June Brent crude futures rose $1.83 to $124.67 a barrel on the ICE Futures Exchange.
(AP)
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That’s the plan, either Ahmanutjob or Chavez will say boo any time there is a hint that prices might stabilize or go down. These traders are conditioned like Pavlovs dogs…
May 9th, 2008 at 11:10 amThe greedy oil speculators are the chief problem in high oil/gas prices, not a shortage of oil. It gets me so steamed every time prices skyrocket because the speculators find some new reason to keep pushing them higher.
I’m not against investing or speculating: I’ve done both, but there ought to be some kind of controls to limit the damage when institutional investors who wield tens of billions of dollars in assets start throwing their money around in ways that hurt everyone like this.
May 9th, 2008 at 11:15 amOld Sailor
You are indeed correct.
An associate of mine likes to tell the story of how in 1973 the tankers were just sitting off the coast of NYC. All the while he would drive pass gas lines on the way to fill up his wooden bottom boat which in turn was easily gassed up at the dock. Its all a swindle
May 9th, 2008 at 11:27 am
Sailor
May 9th, 2008 at 11:29 amAye there mate—these people are apparently untouchable
So, definitive proof of Hugo’s meddling is made available, His buddies in FARC is known to have ingredients for a dirty bomb, We sanction, they embargo, the Dem’s scream ‘cuz gas just shot up more, and viola, the public screams at congress & the tree hugging socialist morons to shut the fuck up , and we start drilling… - everywhere.
May 9th, 2008 at 11:30 amIll make my comment short and sweet since we all know how to fix the problem but nobody listens or gives a shit, apparently those who have the power to fix this do not care about us. so ill just say we’re all pretty much fu*ked, lets face it.
May 9th, 2008 at 12:09 pmEveryone should go to volunteer gas rationing and only by what you must, say 5 gallons per week, see what happens. Sooner or later the oil has to backup by using less. I understand they cannot refine what they have now.
May 9th, 2008 at 1:59 pm