Oil hits record high, hurting nearly all

[yiozik]

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WASHINGTON - The price of oil gushed to a record high Monday, spreading dangerously to factories, groceries, gas stations and every citizen's pocketbook.

Builders are building less, the government reported. Manufacturers are cutting back, another report said. General Motors Corp. and Ford Motor Co. said they would cut second-quarter production.

The galloping energy prices are doubly painful as the nation teeters on the edge of recession: High energy costs push companies to charge shoppers higher prices, then those consumers and businesses cut back in turn, dumping more cold water on the economy.

"It's like throwing sands in the wheels of the economy," said Brian Bethune, economist at Global Insight. "Things slow down. There is more friction and there is more complaining."

Oil prices marched past $103 a barrel on Monday, the latest in a recent string of record-high oil prices, before settling at $102.45.

The steep run-up in oil and other energy prices "hits deeper and deeper into the consumers' ability to spend. With a lot of households stretched by high food prices as well, it creates real problems," said Joel Naroff, president of Naroff Economic Advisors.

Reports Monday showed factories feeling the sting of soaring costs for oil as well as other raw materials — pushing production costs higher even as some have to cope with fallout from a sour housing market that has sapped demand for their products.

Manufacturers in February logged their weakest performance in nearly five years, the Institute for Supply Management said. Industries that suffered declines included makers of furniture, textiles, machinery and chemical products.

Construction spending plunged by 1.7 percent in January, the biggest decline in 14 years, the government said. Cutbacks covered a wide range, from home building to hotels to highways.

Unsure what to make of it all, Wall Street ended the day narrowly mixed. The Dow Jones industrials dropped 7 points.

The average price of a gallon of gasoline stood at $3.165 Monday, according to AAA and the Oil Price Information Service. The Energy Department expects gas prices to peak at a record level near $3.40 this spring, and some analysts predict pump prices could rise to nearly $4 a gallon when the busy summer driving season arrives.

It's not much better in the air. Airplane fares climbed 0.8 percent in January.

Diesel prices, used to transport the vast majority of the nation's goods, are also soaring. Diesel prices hit another new record of $3.674 a gallon Monday.

"Bulky items — milk, soda pop, eggs, cheese, fruits and vegetables — probably will have higher transportation costs to bring those items to stores," Bethune said. "How much of that is passed along to customers depends. In terms of overall costs of products, it might not be huge. It could be a few cents. But overall it will add up."

Food prices are rising but it's hard to divine exactly how much of that increase can be traced to higher energy prices. Food prices rose 0.7 percent in January, reflecting more expensive fruits, vegetables, poultry, pork and dairy products, according to the Labor Department's consumer price index.

With the overall economy slowing, profit-squeezed businesses are having to make difficult decisions: How high can they raise prices? What costs can they cut, including workers?

Employers did cut jobs in January, marking the first nationwide loss in more than four years. Although new-job creation is thought to have improved somewhat in February, the nation's unemployment rate is expected to bump up to 5 percent. The government releases those new figures on Friday. The jobless rate averaged 4.6 percent last year and could climb to as high as 5.3 percent this year, according to the Federal Reserve.

High energy prices, the housing bust and a credit crisis are feeding fears that the country is heading into a recession or is in one already.

The economy skidded to a near halt in the final three months of last year, growing at pace of just 0.6 percent. Many economists think growth in the January-to-March quarter could be even worse — around a 0.4 percent pace — and an increasing number think the economy is actually shrinking now.

[yiozik]

Oil price hits record above 105 dollars

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LONDON (AFP) - Oil prices surged past 105 dollars for the first time on Thursday as traders reacted to a surprisingly sharp fall in US crude reserves and the plunging US dollar, analysts said.

New York's main oil contract, light sweet crude for delivery in April hit 105.10 dollars per barrel, topping the previous record of 104.95 dollars set on Wednesday.

Meanwhile, Brent North Sea crude for April spiked to 102.29 dollars, matching the all-time peak that was hit on Monday.

The US Department of Energy said Wednesday that American crude inventories tumbled 3.1 million barrels last week, marking the first weekly drop for one and a half months.

The news shook the market which had been expecting a gain of 2.4 million barrels and sent New York crude spiking close to 105 dollars.

On the foreign exchange market on Thursday, meanwhile, the euro hit a record high point at 1.5347 dollars.

Dollar-priced raw materials like oil tend to gain from the weak US unit because a fall in the dollar makes them cheaper for buyers using other, stronger currencies.

Oil was also pressured after the OPEC crude exporters' cartel decided Wednesday to maintain current output levels despite calls from the West for a hike to help dampen runaway prices that threaten economic growth.

[yiozik]

Gas, oil rise to records as dollar falls

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NEW YORK - Gas and oil prices jumped to new highs Thursday as the dollar weakened, although crude's gains were limited by fresh evidence of a U.S. economic slowdown.

At the pump, U.S. retail gas prices surged 2.1 cents overnight to a record national average of $3.267 a gallon, according to AAA and the Oil Price Information Service. Gas prices are likely to rise much higher this spring; estimates range from about $3.50 a gallon in the Energy Department's latest forecast to $3.75 or even $4 a gallon according to some analysts.

Diesel fuel, used to transport the vast majority of the nation's consumer goods, also hit a new record. Diesel prices rose another 3.3 cents overnight to a record average of $3.909 a gallon.

Gas and diesel are following crude, which has risen to records in 12 of the last 13 trading sessions. Analysts blame oil's ascent on weakness in the dollar, which dropped to yet another new low against the euro Thursday. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is weak. Interest rate cuts further weaken the dollar, and have helped fuel oil's rise, especially with another reduction expected next Tuesday at the Federal Reserve's regularly scheduled monetary policy meeting.

Light sweet crude for April delivery surged to a new trading record of $111 on the New York Mercantile Exchange Thursday, then slipped back in the normal ebb and flow of trading. In midday trading, the oil futures fell 14 cents to $109.78 a barrel.

"This cocktail's been whipped up by the Federal Reserve," said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm.

Analysts said the Commerce Department report that retail sales fell in February raised new worries that the economy is headed for recession and might curtail demand for oil. Those concerns limited oil's gains, but analysts expect any oil price weakness to be short-lived, and for oil to maintain its upward track.

For consumers, that means pain at the pump — and in the form of higher prices for food and consumer goods, primarily related to rising fuel costs — will continue into the foreseeable future.

"There's really no end in sight to this," Cordier said.

Other energy futures were mixed Thursday. April gasoline futures fell 4.28 cents to $2.6858 a gallon, while April heating oil futures rose 4.27 cents to $3.0671 a gallon after earlier rising to a trading record of $3.086 a gallon.

April natural gas futures rose 11.2 cents to $10.123 per 1,000 cubic feet. The Energy Department reported that gas inventories fell by 86 billion cubic feet last week, slightly higher than the 83 billion cubic foot withdrawl analysts surveyed by Dow Jones Newswires were expecting.

In London, April Brent crude rose 67 cents to $106.94 a barrel on the ICE Futures exchange.

[Prokomenos]

This is a disaster and its only going to get worst.

[Napalm]

In Canada, the oil and gas sector is making record profits but none of it trickles back to citizens outside the industry.

At least Russia is making a boat load of money, with their new found wealth they can stick it to the neo-cons some more.