Oil Prices Spike Past $55 on Energy Report
Light sweet crude prices continued to skyrocket to the highest prices in weeks and closing in on the all time high of over $58 a barrel back in early April. The price in New York traded up to $55.40 after the Department of Energy released it’s weekly report this morning.
Gasoline prices remain relatively steady today trading for $1.55 a gallon after the nearly 8-cent spike yesterday. Brent crude from the North Sea was also trading up this morning, hitting almost $54 a barrel after opening under $53.
The Dept. of Energy report showed crude inventories went up 1.4 million barrels but the real tale of this report is distillate fuels, which includes jet fuel, diesel and heating oil. Distillate number did rise some, 700,000 barrels but much less than the projections. Traditionally during the warmer months, consumption of distillates goes down.
The problem markets run into right now is the inventories for distillates and gasoline for that matter are lower right now. The heating oil, diesel and jet fuel supplies remain low and speculators are nervous about supplies in the coming months after summer. Most efforts right now go to producing gasoline at the refineries and while some distillate fuels are being made, it’s not nearly enough to keep up with current demand as companies by these fuels, hedging their bets that prices will continue to climb. It’s a seller’s market right now.
Also adding fuel to the fire of higher oil prices remains the problems with refineries. The refineries have been running at 95% capacity to help meet demand but as no refinery has been built in the U.S. since 1976, the facilities are getting oil and as they continue to increase capacity, they run into problems. Royal Dutch Shell had reformer problems earlier this week. Sunoco and Conoco/Phillips have had significant refinery problems this year too.
Even though OPEC is running pretty much at capacity with their 25 year high of over 30 million barrels a day, they’ve lost control of the pricing they traditionally dictate through production levels of their wells.
There doesn’t seem to be an end in sight for the fuel problems either. Some experts speculate oil prices will continue to rise well beyond the April highs and demand for gasoline in the U.S. doesn’t seem to be slowing. Dallas FED president Richard Fisher suggested the FED may not kick up interest rates any further but for the moment that won’t help the average consumer. With prices continuing to climb on fuels and in turn just about every other good or service purchased in the U.S., is a serious, nasty recession coming? We had a “recession” and a “jobless recovery” but what happens this time when people haven’t gotten their jobs back and those that do are getting paid significantly less?
John Stith is a staff writer for WebProNews covering technology and business.