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Oil prices: Up, up and
away
By Humberto Marquez
CARACAS - Oil prices hit a new record of
US$66.69 a barrel in New York Friday, driven up by
sustained demand, refinery problems, a drop in
gasoline stocks in the United States, geopolitical
tension and speculative activity. US benchmark
West Texas Intermediate (WTI) closed Friday at
$66.55 a barrel, after climbing to a high of
$66.69 - up 75 cents from Thursday. London Brent
crude also hit a new high of $65.88 a barrel.
The weekly averages were $64 for WTI,
$63.02 for Brent and $56.78 for the OPEC
(Organization of Petroleum Exporting Countries)
basket of 11 benchmark crudes, according to a
report by the Venezuelan Energy Ministry. This
week's prices were $3 higher than a week ago, $6
higher than a month ago, $15 higher than in the
first quarter of 2005, $25 up from the 2004
average, and more than double the prices two years
ago. But adjusting for inflation, they are still
below the post-Iranian revolution prices of 1979,
when they soared to more than $40 a barrel,
equivalent to $80 a barrel today.
Iran,
OPEC's second largest exporter - after Saudi
Arabia - again indirectly contributed to last
week's price rise due to concern sparked by its
clash with the European Union and the United
States over its nuclear program. But Seth
Kleinman, an analyst with US-based PFC Energy,
said prices were expected to hit $70 a barrel
sooner rather than later.
Venezuelan
President Hugo Chavez, who signed oil cooperation
deals last week with Argentina, Brazil and
Uruguay, remarked: "Oil prices will continue
rising because the reserves are running out on one
hand and there are factors like the war in Iraq on
the other. The United States' plans didn't work
out. They had hoped that by now they would have
had Iraq under control and be producing three
million barrels a day, but they haven't been able
to get the country under control." Ironically, the
high prices President Chavez blames on the Iraq
conflict have worked out exceedingly well for his
own government, which is using the windfall of oil
revenues to fund populist programs that would
arguably be unaffordable otherwise.
Iraq
is pumping less than two million barrels a day,
and like the rest of the OPEC members, as well as
the non-OPEC producers, it is producing at near
capacity, in order to meet the current global
demand of 84 million barrels a day. OPEC, which
produces nearly 40% of the world's oil and
accounts for around 55% of total shipments, is
made up of Algeria, Indonesia, Iran, Iraq, Kuwait,
Libya, Nigeria, Qatar, Saudi Arabia, the United
Arab Emirates and Venezuela.
Driving the
steady high demand for oil is economic growth in
the United States and in emerging giants like
China and India. But prices are rising because of
fears in the US and other markets of possible
gasoline shortages due to problems in refineries.
For example, ConocoPhillips, the largest US oil
refiner, suffered a power failure and fire
Wednesday in its Wood River refinery in Illinois.
Although the 306,000 barrels a day processed by
the plant is a small amount in comparison to total
US gasoline consumption of 9.5 million barrels a
day, the partial shutdown came on top of an Energy
Department report that gasoline inventories had
shrunk of late from 205.2 to 203.1 million
barrels.
In the face of possible gasoline
shortages and higher prices in the United States -
the retail price currently averages $2.37 a gallon
- traders are seeking to stock up on oil supplies
and are thus pushing up demand and prices.
"Speculation now adds $18-20 to the price of each
barrel," said Venezuelan oil expert Mahzar al
Shereidah. Speculative transactions are based on
levels of inventories, refining capacity and
demand in markets like the United States, as well
as weather reports on the hurricane season
affecting oil-producing areas in the Gulf of
Mexico, and above all, the situation in the Middle
East.
While Iran became a cause of market
jitters last week, concern rose the week before
that after the United States warned of the
possibility of terrorist attacks in Saudi Arabia,
which pumps 9.5 million barrels a day of crude,
making it the world's top producer. "There are
many geopolitical risks, yet there is no slack in
the system to handle any disruptions," said Tony
Nunan, manager for energy risk management at
Mitsubishi Corporation in Tokyo.
For small
consumer nations like those of Central America,
today's huge oil bills are a heavy burden on their
economies. This year, Nicaragua will pay some $520
million, 95 million more than in 2004, for the
10.5 million barrels it imports, while El Salvador
will spend $900 million to import the same
quantity of oil that it purchased last year for
$670 million.
(Inter Press
Service) |
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