Analysts Predict More Oil Woes
On the floor of the New York Mercantile Exchange Thursday, the price of crude broke $35 a barrel for the first time in a decade, and CBS News Correspondent Anthony Mason reports it could go even higher.
"This market could go $5 in either direction depending on whatever news comes out. It's a very crucial point on where the market is right now," said David Green, an analyst with Sterling Commodities.
Since the end of July, the price of crude oil has risen steadily, up almost 25 percent. Oil prices have more than tripled since hitting a 12-year low of less than $11 a barrel in December 1998, before production cuts forced prices higher.
Although the 11 member states of OPEC — which stands for Organization of Petroleum Exporting Countries — are expected to approve a 500,000-barrel-a-day increase this weekend, a concerned President Clinton met in New York with Saudi Arabian King Abdullah to press for more oil.
"I told him that I was very concerned that the price of oil was too high, not just America but for the whole world," Clinton said.
High gas prices were a major contributor to inflation in the U.S. this summer, and inflation can lead to recession. High fuel prices can be especially harmful because almost every business uses fuel.
Cab drivers in France would agree: they drove at a snail's pace Thursday to protest rising fuel prices. The strike has paralyzed the country. But analysts say the 500,000 more barrels a day expected from OPEC may not be enough.
"The long term problem here is that we don't have enough refining capacity. That's the problem we had with gasoline in the spring. That's the problem we have with heating oil now," said Bill O'Grady, an analyst with A.G. Edwards.
That's why David Costello predicts home heating prices will rise this winter.
"The only problem is that a whole lot of improvement is going to be difficult to start before the heating season starts, because its almost here now," said Costello, co-author of a new Energy Department study forecasting higher home heating oil costs this winter.
"Home heating oil is in a bit of a precarious situation, because inventories there are way below normal," he said.
Inventories fell as refineries switched from refining home oil to diesel in response to a trucker's strike, Costello said.
Mother Nature may save the U.S. from a bad home heating winter. Forecasters predict a mild winter, but if that doesn't happen, it's not likely that the U.S. will be very well-prepared for it.