The turmoil in the Middle East and North Africa looks likely to send U.S. gas prices higher.
Among the many questions are “how high,” “how soon” and “who will feel it the most.”
“You're going to start to feel this, to the tune of 10, 12 cents (per gallon) even,” Denton Cinquegrana, an analyst at the Oil Price Information Service, said Tuesday. “The wholesale prices are moving up. That, in turn, is going to raise retail.”
Oil prices soared to the highest level in more than two years on Tuesday as Libyan leader Moammar Gadhafi urged his supporters to attack protesters who are violently challenging his 42-year rule.
Only a small part of Libya's oil production appeared to be affected, though analysts fear that similar revolts will spread to OPEC heavyweights like Iran.
Benchmark crude oil for April delivery jumped $5.71, or 6.4 percent, to settle at $95.42 per barrel on the New York Mercantile Exchange. Oil hasn't been that high since it settled at $97.92 on Oct. 1, 2008.
Libya exports 1.2 million barrels of crude oil per day. Any production losses there could be quickly absorbed by other countries such as Saudi Arabia.
The official Saudi Press Agency quoted Saudi Arabia's oil minister Ali Naimi as saying that Saudi production capacity of 12.5 million barrels per day can help “compensate for any shortage in international supplies.” Saudi Arabia produces around 8 million barrels per day.
Prices of processed unleaded gasoline are $2.78 per gallon, said Rose White, a spokeswoman for AAA Nebraska.
That's significant, she said, because that figure is used as a baseline for determining how much people can expect to pay at the pump within the next two weeks.
When you add in the 65 cents per gallon U.S. average for state and federal taxes and other costs, “you're looking at an average of $3.43 (per gallon),” White said.
The average price of a gallon of regular unleaded gas in Nebraska was $3.24.9 on Tuesday, according to AAA. In Iowa, it was $3.21.4.
Analysts at BoA Merrill Lynch say the world economic recovery would be jeopardized if oil climbed to an average of $115 a barrel this year and $130 next year. That would return the world's energy bill as a share of the economy to the 9 percent level of the 1980s, when costlier crude tipped consuming nations into a recession, the analysts said in a Jan. 25 report.
Still, that's unlikely because energy demand is expected to drop this year; inventory levels are near a five-year high; OPEC nations have more spare productive capacity than in 2008; and more Iraqi crude is on the way, according to the report.
Energy consultant Jim Ritterbusch said a “fear premium” has added about $10 per barrel to the price of oil. That means prices could tumble once the region settles down. “But that doesn't look like it's going to happen any time soon,” said Ritterbusch, president of Ritterbusch and Associates oil trading advisory firm of Galena Park, Ill.
This report includes material from the Associated Press and Bloomberg News.
Contact the writer:
402-444-1109, bob.glissmann@owh.com
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