$3 plus begins to yield voluntary conservation. People are thinking of ways to cut consumption and probably in ways that wont negatively affect the rest of the economy. My son in law is alternating days with a fellow worker in a carpool. My mother in law is taking public transport available to her whenever she can. This story is being repeated nationwide.
Oil plummets on surprise build in supplies
Backs away from record prices as crude inventories swell by 1.7 million barrels, gasoline adds 2.1 million barrels.
By Steve Hargreaves, CNNMoney.com staff writer
May 3, 2006: 11:06 AM EDT
NEW YORK (CNNMoney.com) - Oil prices fell Wednesday after a government report said gas and oil inventories rose unexpectedly.
U.S. light crude for June delivery fell $1.01 to 73.60 a barrel on the New York Mercantile Exchange. Crude was trading down 16 cents just prior to the report, within striking distance of its all time trading high of $75.35 set April 21.
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In its weekly stockpile report, the Energy Information Administration said crude supplies rose by 1.7 million barrels, while closely watched gasoline inventories swelled by 2.1 million barrels. Analysts were looking for a 100,000 barrel decline in crude and a 700,000 barrel drop in gasoline supplies, according to Reuters.
Distillates, which are used to make diesel and heating fuel, fell by 1.1 million barrels. Analysts were looking for a 100,000 barrel decline.
Oil prices have ebbed and flowed over the last couple of weeks.
Last week they fell around 5 percent, helped down by a drop in U.S. gasoline stocks that was less than expected and various proposals from lawmakers to ease gas prices, including ones by President Bush to cease filling the Strategic Petroleum Reserve and temporarily ease clean air standards.
Geopolitical worries
But prices shot up again this week, fueled by big investment fund buying and a continuously tense geopolitical climate, which is able move prices far more than in the past because Saudi Arabia is pumping at full capacity and unable to boost production in the event of a crisis.
In the latest developments, Iran, which is locked in a conflict with the West over its nuclear program, said Tuesday that it would attack Israel if it was struck militarily by the U.S., raising the prospect of a broader conflict in the oil rich Middle East.
Iran has refused to abide by a United Nations Security Council order to stop enriching uranium, which it says is for peaceful power generating purposes but several nations, including the U.S., France and England, say is intended to build a weapon.
On Tuesday Iran said it had increased its enrichment of uranium to 4.8 percent, close to the 5.0 percent compatible with civilian power stations.
The U.S., France and England are believed to be presenting the Security Council with options Wednesday to get Iran to comply with the order, options which could include sanctions or military strikes.
Any immediate action is unlikely since China and Russia, Security Council members with veto status, don't support sanctions against Iran. And Iran, has said it would not use an oil embargo as a political weapon.
But oil traders are not reassured, and the prospect of confrontation with the country, the world's fifth largest oil producer, is helping keep oil prices high.
Other geopolitical concerns include Nigeria, where one quarter of the countries high-quality crude is shut in due to clashes with militants, who operate in an oil rich but impoverished area of the country and are demanding the oil wealth be spread more equitably.
And in Bolivia, the country's newly-elected left leaning president sent troops in to nationalize the country's oil and natural gas resources Monday.
Although Bolivia is a fairly minor player in the worldwide energy market, analyst said it is part of a larger global trend for governments to demand more taxes and royalties from oil companies, which have posted record profits along with oil's record prices.
Although geopolitics garner the headlines, they are only one factor that has caused oil prices to triple over the last three years.
Big investment funds, chasing returns amid a lackluster Dow in 2005 and relatively low global interest rates, have invested heavily in all commodities.
And supply and demand remains a bedrock cause as a continued and growing use in the United States and a newfound thirst from China, India and other developing countries combines with the realization that new discoveries of large deposits of high-quality, easily recoverable oil is probably a thing of the past. |
