Oil hits $134
Declining dollar helps to drive record prices
Supply worries, rising demand and a slumping dollar are conspiring to make filling up the car — and paying for just about everything else — a growing burden for Americans.
With gas and oil prices setting new records on a daily basis, many analysts are beginning to wonder whether anything can stop prices from rising. There are technical signals in the futures market, including price differences between near-term and longer-term contracts, that crude may soon fall. But with demand for oil growing in the developing world, and little end in sight to supply problems in producing countries such as Nigeria, few analysts are willing to call an end to rising oil prices.
Oil's Wednesday rally was fed in part by a report from the Energy Department's Energy Information Administration, which said crude inventories fell by more than 5 million barrels last week. Analysts had expected a modest increase.
Light, sweet crude for July delivery rose $4.19 to settle at $133.17 a barrel on the New York Mercantile Exchange, but prices rose as high as $134.42, up $5.44, in after-hours electronic trading. It was crude's largest one-day price advance since March 26.
"Even if this report was bearish, with the momentum the way it is right now, it wouldn't matter," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Crude prices first passed $130 overnight on concerns about demand and a weaker dollar. Analysts say crude has been boosted in recent days by especially strong demand for diesel in China, where power plants in some areas are running desperately short of coal and certain earthquake-hit regions are relying on diesel generators for power.
The dollar, meanwhile, weakened against the euro Wednesday. Investors see hard commodities such as oil as a hedge against inflation and a weak dollar, and they pour into the crude futures market when the greenback falls. A weak dollar also makes oil less expensive to buyers dealing in other currencies.
Many investors believe the dollar's protracted decline over the past year has been the most significant factor behind oil's rise from about $66 a barrel a year ago to today's highs.
At the pump, meanwhile, the average national price of a gallon of regular gas rose 0.7 cent overnight to a record $3.807 a gallon, according to a survey of stations by AAA and the Oil Price Information Service. Prices are 60 cents higher than a year ago, and many forecasters believe they'll hit $4 on a national basis at some point over the next month.
Recent comments
Some folks are so ignorant of facts it's truly amazing. People...
no drilling !! | May 22, 2008 at 9:59 a.m.
might as well dig deeper into your wallet and fuel up that BIG SUV...
nothing we can do | May 22, 2008 at 9:46 a.m.
Our efforts are better spent on becoming the world leaders in alternative...
Concur with Really | May 22, 2008 at 9:39 a.m.
