Oil Crashes The $60 Barrier
As oil prices passed $60 per barrel, investors began a selloff that dropped the Dow to a 10 week low.
Persistent worries about oil supplies failing to meet demand in the upcoming winter drove prices for light sweet crude above $60 per barrel yesterday. After hitting $60.05, the price finally settled at $59.42 on the New York Mercantile Exchange.
Analyst have become concerned about the impact of gushing oil prices. When FedEx reported record fourth quarter earnings and revenue, it also noted jet fuel pricing as a factor in pushing down its earnings per share target for the first quarter.
Despite FedEx’s gains, that first quarter earnings revision promptly earned the wrath of Wall Street. Shares of FedEx plunged 8.3 percent to $80.77 per share. Shares of General Electric and Merck also went down, bringing the Dow along for the ride.
The ongoing climb of crude pricing, up 58 percent from the previous year, has earned the big five oil companies huge profits. OPEC has not been able to influence pricing. Even as it recently agreed during its Vienna summit to increase production, OPEC members were commenting that the real problem rests with too few refineries and and too much demand.
The rising economies of China and India have been a factor in driving up demand for crude oil. As residents gain affluence, the demand for cars has increased for those citizens. In China, the once ubiquitous bicycle has started to be supplanted by cars in cities.
In Maryland on Wednesday, President Bush discussed his energy policy, which has moved out of committee in the Senate. He discussed the potential for diversifying the energy supply, citing examples like ethanol made from corn, and biodiesel fuel made from soy beans. The President also touched on nuclear power, citing its cleanliness and productivity.
David Utter is a staff writer for WebProNews covering technology and business. Email him here.