Gas, Oil Prices Keep Rising
The retail price of gasoline rose for the fourth straight week to an average of $1.99 per gallon, the Energy Department reported Tuesday.
"When you got to buy gas like I have to buy gas, it hurts," said limousine driver Jeff Dixon.
"And it doesn't look like its going to stop any time soon," said motorist James Hammond.
Overnight, crude oil futures retreated from record levels of more than $54 a barrel in Asian trade Wednesday, as traders nervously monitored developments in strike-hit Nigeria and recovery efforts in the Gulf of Mexico.
While oil prices are around 80 percent higher than a year ago, they are still more than $27 below the peak inflation-adjusted price reached in 1981.
Still, many market observers say prices are likely to continue to skyrocket because of continuing supply concerns.
"It's a small correction just before the winter season. It's November (delivery), the December, January prices will be more expensive," said Misui Bussan, chief commodities strategist for Tetsu Emori in Tokyo.
OPEC has opened its spigots, but global demand is surging, reports CBS News Correspondent Anthony Mason, led by China, which imported 50 percent more fuel oil in the first half of this year. The market is so tight, even a change in the weather can drive up the price of crude:
The damage to oil rigs in the Gulf of Mexico after Hurricane Ivan was so bad, analyst John Kingston of Platts said, that even now, three weeks later, more than a quarter of the crude production in the Gulf is still shut down.
"Hurricane Ivan has been incredibly significant," Kingston said. "In a market this tight, it simply can't afford to lose that much production."
Damage to oil and natural gas pipelines in the Gulf of Mexico from Hurricane Ivan could take up to six months to repair and fully and restore production to levels before the storm, a federal official said this week.
Although Ivan did considerable damage to drilling rigs and production platforms, much of that damage has been accounted for or repaired.
Chris Oynes, regional director of the U.S. Department of the Interior's Minerals Management Service in New Orleans, said the current problem is that pipelines designed to carry oil and gas away from the production sites also have been damaged. That could take longer to fix.
The oil market is awaiting the release of U.S. crude inventory data on Thursday, which is expected to provide a clue to how well recovery efforts in the Gulf of Mexico oil fields, ravaged by Hurricane Ivan in mid-September, are going.
Excess capacity now hovers just about 1 percent above the world's daily diet of 82 million barrels, and the Paris-based International Energy Agency, a watchdog for oil-consuming countries, said Tuesday that demand is expected to rise to close to 84 million barrels a day by 2005.
The U.S. government gasoline survey said the average price nationwide of regular-grade unleaded gasoline increased 5.5 cents last week to $1.993. Prices are 42.5 cents higher than a year ago.
Average nationwide prices peaked at $2.06 a gallon during the week ending May 22.
Pump prices are highest on the West Coast, averaging $2.066 per gallon, and cheapest on the Gulf Coast, averaging $1.824 per gallon. In the Midwest, gas averages $1.906 per gallon.
Kansas City-based trucker Yellow Roadway is passing on rising fuel costs for its 20,000 trucks to its customers.
"We adjust the fuel surcharge every week based on published fuel prices and it goes right on the customer's invoice," CEO Bill Zollars told CBS News.
So far, Zollars says those customers aren't complaining about the 10 percent surcharge, because the economy is s strong and they're shipping more goods. But he's worried about the effect if oil prices keep rising.
"At some point it does start to impact the economy, impacts our customers and that, of course, impacts us as a result," he said.
Adding to supply concerns, the Royal Dutch/Shell Group said its Nigerian output would be cut by 20,000 barrels a day because of a ruptured pipeline. While officials tried to investigate, a group of saboteurs set the pipeline on fire, Shell said in a statement.
The production cuts come in the middle of an oil workers' strike and a fragile peace deal between rebels and the government for control over the oil-rich Niger Delta that churns out 2.5 million barrels of crude daily.
Nigeria is Africa's largest exporter and the fifth-largest source of U.S. imports.
Both Nigeria and the Gulf of Mexico produce low-sulfur content crude, particularly desirable for refiners and in high demand currently.
"Nigeria is a big concern. It's quite a dangerous situation if supply stops from there as people are looking for light, sweet crude," Emori said.
Repeated efforts by the Organization of Petroleum Exporting Countries to lower prices by boosting output have been largely ineffective because the oil they offer the market has a high-sulfur content.
Developments in Russia came firmly back into play as the Justice Ministry moved to sell an unspecified chunk of oil giant Yukos' subsidiary Yuganskneftegaz to meet some of its $7 billion back tax bill. Russian officials valued Yukos' largest production unit at $10.4 billion.
Yukos produces about 2 percent of the world's oil and said it might have to cut production if the government continues its relentless pursuit of the taxes.