Oil Sets New Record: Over $132 A Barrel

Analysts Fear Little Can Be Done To Stem Runaway Prices

(AP)  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 soon fall. But with demand for oil growing in the developing world, and little end in sight to supply problems in producing countries 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 $2.67 at $131.65.

Investors seized on the inventory report to boost prices Wednesday, but traders interested in pushing prices higher are increasingly picking and choosing which news they wish to pay attention to, analysts say.

"Even if this report was bearish, with the momentum the way it is right now, it wouldn't matter," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

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 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," said Linda Rafield, senior oil analyst at Platts, the energy research arm of McGraw-Hill Cos.

Prices are already that high in many parts of the country, and the number of stations charging $4 or more rises each day. Prices are nearing $5 a gallon in parts of Alaska.

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.

A move by the government to shore up the dollar, or an announcement that the Federal Reserve won't cut interest rates further, could also reverse the upward momentum, Flynn said; rate cuts tend to weaken the dollar.

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. Many analysts have long argued that prices have risen well beyond levels that can be justified by supply and demand fundamentals.

"It's very difficult to call when this is going to happen, but when it happens, it's going to be quick and ugly," Flynn said.

In other Nymex trading, June gasoline futures rose 6.43 cents to $3.3687 a gallon, and June heating oil futures rose 7.11 cents to $3.8461 a gallon. June natural gas futures rose 19.8 cents to $11.563 per 1,000 cubic feet.

In London, July Brent crude rose $3.10 to $130.94 a barrel on the ICE Futures exchange.

[oladywho]

There are engines that burn water in production right now. There are many websites showing these engines in use. The automotive industry isn%u2019t clamoring to build cars and trucks that have these engines because they don%u2019t want to spend the money to develop the technology and change engine compartment design. Congress should appropriate grants/funds for entrepreneurial development of these engines. They should also mandate a date by which all engines must burn water, just like television broadcasting will only be high definition by February, 2009. Technology is on the move in every other business, why not the oil and automotive industries? We should quit buying oil burners and insist on water burning engines in our vehicles.

In the first speech George Bush made as president he said congress should appropriate money for development of alternate fuel for engines to decrease our reliance on oil. We always thought gas would be cheap, so we didn%u2019t push and shove to change anything. We are reaping what we''ve sown, in our usual, apathetic, greedy way. Neither the president nor congress controls the cost of gas, folks. Our demand for oil does. It is so simple. If the demand goes down, the cost will go down. We will always need petroleum products, but weaning millions of cars and trucks from oil would help immensely. We need an alternate solution to oil. Many world problems would be alleviated also, because the ebb and flow of oil would not control world politics.

[wardoglrs]

The house of cards now in play.. American goverment and its decieved people are nothing less than a ***.
Your pimp is The Federal Reserve and its leader''s are secret to all. Heres a hint for the uninformed.

United Nation''s
CFR.
Cafta.
Nafta.
TC.
And many more.
Soon the usa will fall to its knees. Its people will be homeless. War Gas Food And inflation will put the US in the 3rd world bracket in the years that follow.
They will die in despair with there ipods on there heads. They have been dumb downed since birth brain washed by there Zion Masters the same ones that started ww2.

[bobnjersey]

[Gas prices have almost doubled since democrats took congress...You get a democratic president and prices will triple from these ''''no new drilling''''democrats.The democrats are not the solution...THEY ARE THE PROBLEM.]
[Posted by b48151 at 06:03 PM : May 22, 2008]

what a fool ... why don''t explain the connection between the democrats and the doubling of prices ... i can''t wait for this one.

[noloyalisti]

We need a Democratic president and Congress to reel in the out-of-control war-profiteering oil companies.

[bobnjersey]

[bobnjersey, I wrote my senators a few weeks ago, haven''''t gotten one reply back from them. ]
[Posted by ranger1948 at 06:14 AM : May 22, 2008]

the response to provide is likely now in committe and the specific ambiguous language to use is being negotiated as we speak ;-)

[mcvet]

We definatelky need to regulate the gas and oil companies again. It was the most stupid thing carter ever did in office.


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Posted by ranger1948 at 06:15 AM : May 22, 2008
+ report abuse

No no! That was NOT Carter. Better check your facts on that one. Carter did what the Fascist and the Oil Company''s said needed to be done. Old Ron was the man who lifed ALL controls on those corporations... IF you will Google the issue you will find that the Reagan Administration removed ANY and ALL price controls on Oil as THEIR "fix" to the problem.

[mcvet]

popstom1
I still drive thru open country and see oil wells sittig idle because the govt only allows them to drill for so much oil at a time. Another sign to show you govt is beinding us over coninuously.


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Posted by ranger1948 at 06:36 AM : May 22, 2008
+ report abuse

Ah but THAT was part of Darth''s "Energy Policy" if you remember. When Enron feel apart, the Wire Taps reveiled that Darth and the Bush Administration turned a blind eye toward Energy Company''s creating shortages. There is NO rule or law to prevent those wells from pumping oil or for anyone drilling deeper or in any area around them. That''s a decision made by the Oil Company''s. Fact is that our refineries are running, right now at 85% because there is to much demand created by the Global Economy. I guess that "Free" Trade the fascist pushed down our throat wasn''t "free" after all. Sieg Heil Bush

[omnibus66]

Does anyone really think that the oil companies give a cr@p about what the people or Congress think of them? They have us by the ba11s and they know it.

If you can''t afford $5 per gallon gas (coming soon to a station near you), get ready to walk or ride a bicycle.

If you think things are bad now, hang on, cause you ain''t seen nothin yet.

[ranger1948]

popstom1
I still drive thru open country and see oil wells sittig idle because the govt only allows them to drill for so much oil at a time. Another sign to show you govt is beinding us over coninuously.

[ranger1948]

We definatelky need to regulate the gas and oil companies again. It was the most stupid thing carter ever did in office.

[ranger1948]

bobnjersey
I wrote my senators a few weeks ago, haven''t gotten one reply back from them. I think it is time we threw everyone out of congress and elected a new group, put them under the social security plan. Who in the hell can serve one term and get 100% pay for the rest of their lives ? This isn''t right. Congress had its chance to change things and they just go along with bush. I think it is time to impeach bush and his regime and congress and try them all for war crimes. We are in a depression and headed for a civil war. I hope the American people will come together and find a way to prevent it. The talk about having truckers and everyone in the country stop working for one week and not purchase anything would be a great idea if we could get everyone to do it. I think it would bring our govt to its knees.

[ranger1948]

element51
If we were all rich like bush it wouldn''t even be a rought spot.

[popstom1]

have you seen an oil well they burn off ton''s and
ton''s of gas right here in Southern IL.

[tx2democrats]

it is time to take the oil companies
away from corporate america, our military
needs to step in and take over all oil
companies, Oil should be government own,
investors should not be setting our prices,
it must end

[bobnjersey]

[The country seems to be split into two separate nations and the hatred is so thick you can almost feel it. I wonder if I am the only person who feels this way.]
[Posted by Element51 at 09:56 PM : May 21, 2008]

this is accurate ... you''re not alone.

[I don''''t like it and I wish I could get some idea of what to expect. I''''ve always been one of those who try to prepare for the future but I have no idea of what to do.]

unfortunately ... it will take a major event to overcome the petty and selfish attitudes we have all come so accustomed to. a natural catastrophe ... economic meltdown ... war over oil, water, or other resource ... who knows.

we''re all just stupid selfish b@stards ... and until we''re all put in our place everyone will blame someone else for the problems.

write your congressman ... it may make no difference ... unless everyone did on the same issue:

http://www.congress.org/congressorg/directory/congdir.tt?action=myreps&myzip=07712&submit=GO

[bobnjersey]

[I have no idea as to how we will do that but the old days are gone forever and they ain''''t commin back. I just wonder how far this can go before there is a complete break down of our society. Pretty scary schite.]
[Posted by Element51 at 09:41 PM : May 21, 2008]

between now and november this may become the key issue in the presidential election. there are no easy answers.

alternate sources of fossil fuels (new places to drill) will be necessary in short term ...

alternate forms of energy will be neccesary in long term (nuclear, solar, wind, etc) ...

signifigant conservation of current uses will be critical to stem growing demand ...

x2, x3, x4, x5 increases in mpg on vehicles ...

a revolution in lighting and heating technologies ...

a change in attitude about our glutonous way of life.

a major scientific breakthru in fusion reactors or similar unknown means could be an answer as well.

http://www.pppl.gov/

[shanev137]

If the oil companies are allowed to drill in protected areas in America, if they go in and find the oil and drill the wells and pump out the oil, who does the oil belong to? Some of you seem to indicate that this will help solve the problem and bring gas prices down. But if the oil companies own the oil, can''''t they sell it where they want and for whatever price they want?


-----------

There''s enough natural gas alone in Alaska to last us 4 generations.

All that oil and natural gas would need to be nationalized...taken over by our government via eminent domain and taken off the financial markets and not traded at $130 a barrel.

We could effectively buy gas/natural gas at the pump from our government at the cost of drilling it and refining it, which would be way less than $4 a gallon.

More like a $1.50 a gallon after costs.

[element51]

Maybe I am over reacting and acting like a drama queen but I can''t help the feeling that our lives are going to be turned upside down. For the first time in my 63 years I''m actually scared. And the funny thing is that I''m not sure what it is that I am afraid of. I just feel like I no longer have control over my own life and it seems like there is no one who has the slightest idea of what to do. Bush tells us that we are just going through a "rough patch" and that the economy is strong and everything is fine. Then energy costs and food go through the roof and that is our reality. Maybe his is different. The candidates are not coming up with anything. They seem to be to busy sliming each other. I am watching the destruction of my party because Hillary will have the nomination or else. The country seems to be split into two separate nations and the hatred is so thick you can almost feel it. I wonder if I am the only person who feels this way. I don''t like it and I wish I could get some idea of what to expect. I''ve always been one of those who try to prepare for the future but I have no idea of what to do. Our savings are going since we now have to go into them to pay our bills. I apologize to you all but sometimes it is good to vent. Thank you for your indulgence.

[shanev137]

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.

------------


That paragraph in the article says it all!!

Nothing more at all needs to be said about oil and gas prices.

[bobnjersey]

[... install a government that represents We the People instead of the corporate elites.]
[Posted by noloyalisti at 05:38 PM : May 21, 2008]

this is really the root cause of all our issues ... but there really isn''t anything in sight that appears to be likely to change this.

public financing of campaigns, term limits, real ethical reform, rep to lobbyist moratoriums w/ other tight lobbying restrictions ... along with an electorate that pays attention ... would all be required to turn it around.

the ones who have the ability to change this ... are the same ones who benefit from it staying exactly as it is right now.