Oil Price Gushes to Record Levels; Iraqi Turmoil Shuts a Pipeline
Byline: Patrice Hill, THE WASHINGTON TIMES
Oil prices shot up to a record $44.84 a barrel yesterday after a Shi'ite Muslim uprising forced Iraq to shut down a pipeline feeding its Persian Gulf export terminals.
Despite soaring oil prices, the average price of regular-grade gasoline eased last week to $1.877, the lowest in three months, reflecting ample stocks of high-grade fuel blends as the United States nears the end of its peak summer driving season, the Energy Department said.
Although the threat of disruptions of overseas oil supplies has been constant this summer, U.S. refineries enjoyed a remarkably trouble-free summer and experienced no major disruptions in their race to produce the clean summer fuels required by environmental regulations.
However, this month's run-up in oil prices, which many analysts say are headed for $50 or higher, bodes ill for consumers during the home-heating season, when households once again will be confronted with budget-busting utility bills, analysts say.
The high energy prices cut into consumer spending power, particularly among low-income households that spend a large portion of their take-home pay on fuel. Economists say oil prices at $50 or higher would cut economic growth in the United States significantly.
"If oil hits $50, it would stifle growth" around the world, said Daniel Yergin, chairman of Cambridge Energy Research Associates, who says the odds are even that oil prices will rise to $50 within weeks.
Mr. Yergin noted that even the slightest threat to oil supplies has sent prices soaring because producers have about 2 percent spare capacity in case of an emergency - a margin that is slimmer than it was during the 1973 oil crisis.
Deutsche Bank yesterday warned clients that oil prices could spike to $100 if two major disruptions occur in exports in hot spots around the world, from Russia to Venezuela to Iraq.
But Mr. Yergin said he thought such a scenario was unlikely, because such high prices more likely would cause a collapse in demand among consumers first.
Prices in the $40 range already have slowed growth in the United States, although the high prices have not appeared to significantly slow double-digit increases in oil consumption in China, the fastest-growing market. …