Newspaper article The Christian Science Monitor

Dow Is Down, Oil Prices Up as Nervous Markets Eye Libya's Qaddafi

Newspaper article The Christian Science Monitor

Dow Is Down, Oil Prices Up as Nervous Markets Eye Libya's Qaddafi

Article excerpt

Unfounded rumors, such as one that a besieged Qaddafi plans to destroy Libya's oil wells, drove oil prices above $100 a barrel Wednesday before closing at $98.10. It all means higher gasoline prices for consumers.

The oil markets are now awash in rumors, such as one on Wednesday that Libya's besieged leader, Col. Muammar Qaddafi, plans to destroy his country's oil wells.

This unfounded rumor and many more like it are among the reasons the price of oil rose above $100 a barrel during trading on Wednesday, ultimately closing at $98.10 a barrel.

"It shows the tensions and fears if Qaddafi engages in a scorched- earth policy and destroys the country's infrastructure," says John Kilduff, founding partner of Again Capital in New York. "If that were to happen, it could bring the price of oil up to $110 or $115 a barrel - that's what taking 1.1 million barrels of oil per day off the market is worth."

Muammar Qaddafi: Five ways Libya's leader has held onto power

There are no signs that Colonel Qaddafi has started any program to destroy Libya's energy production. Nevertheless, fears about the prospect of sharply higher oil prices rippled through Wall Street, where the Dow Jones Industrial Average fell 107.01 on Wednesday to 12105.78.

Although higher oil prices would contribute to inflation, their larger threat to the economy would be a stall or slowing of the recovery, says economist Joel Naroff of Naroff Economic Advisors in Holland, Pa.

"You would clearly be taking money out of the pockets of consumers, who have not had much chance to catch their breath and spend again," he says. "With these prices, a good portion of the cuts in Social Security taxes [part of the tax compromise at year's end] could get pumped into gas tanks, not the economy."

On Wednesday, the average price of a gallon of gasoline was $3.19 a gallon, up 8 cents a gallon from a month ago and 52 cents a gallon higher than a year ago, according to AAA, the motorist club. …

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