Oil Climbs Above $142 On Sliding Dollar

NEW YORK — Oil futures climbed to a new record near $143 a barrel Friday as the dollar weakened against the euro, confirming expectations that the falling greenback, a major factor in crude's stratospheric rise, will extend its decline and add to oil's appeal.

Retail gas prices inched lower overnight, but are likely to resume their own trek into record territory now that oil futures have broken out of the trading range where they had been for nearly 3 weeks.

Light, sweet crude for August delivery rose as high as $142.99 a barrel on the New York Mercantile Exchange before pulling back sharply in a spate of late-day profit-taking to settle up 57 cents at a record $140.21. On Thursday, the contract shot past $140 and rose more than $5 to a new settlement record.

The latest record came as the dollar fell against the euro in afternoon trading, having traded roughly unchanged for much of the day.

"The dollar was slightly stronger, and when it gave up its gains, that gave oil the green light," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.

The market now believes the Federal Reserve is unlikely to raise interest rates in the near future; since higher rates tend to strengthen the dollar, traders are anticipating that it will continue to fall and, consequently, that investors will keep turning to commodities including oil as a hedge against inflation.

"Oil's back in favor, especially with people bailing out of the stock market," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

The stock market's recent swoon is also sending investors in search of higher-yielding investments. On Thursday, the Dow Jones industrial average fell nearly 360 points, and in afternoon trading Friday was down more than 100 points.

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"When money has nowhere to go, it is parked in commodities as it is one of the few investment instruments that actually rises the more money you pour into it," said Oliver Jakob, an analyst at Petromatrix Gmbh, in Switzerland in a note.

With oil over $140 a barrel, traders are now expecting to see $145 and even $150, analysts say.

At the pump, meanwhile, gas prices slipped 0.1 cent overnight to a national average of $4.066 a gallon, according to a survey of stations by AAA, the Oil Price Information Service and Wright Express. Gas prices have fallen slightly from their June 16 record of $4.08 a gallon, but will likely resume their record breaking rise if oil futures keep trending higher.

That seems likely. Oil has more than doubled in the past year due to the dollar's decline, but also because of rising global demand, particularly in fast-growing economies such as China and India. Supply outages in the Middle East and Nigeria have also contributed, as has falling production in Mexico.

The sharp increase in oil prices has driven a similar rise in fuel prices. Gas prices are $1.09 higher than a year ago, and diesel prices were up $1.85 over the past year at a national average of $4.763 a gallon on Friday. Diesel is used to fuel most industrial vehicles, trucks, trains and ships, and its increase is a large part of the reason food and consumer goods prices are rising, putting additional pressure on consumers already paying $4 and more for gas. Diesel prices peaked at $4.797, also on June 16, but are likely to push past that record if oil futures keep rising.

In other Nymex trading Friday, July gasoline futures fell 1.01 cents to settle at $3.5012 a gallon after earlier rising to a trading record of $3.585. July heating oil futures rose 2.32 cents to settle at $3.9066 a gallon. August natural gas futures fell 5 cents to settle at $13.198 per 1,000 cubic feet.

In London, Brent crude futures rose 48 cents to settle at $140.31 a barrel on the ICE Futures exchange.

____

AP Business Writer David McHugh in London contributed to this report.

Comments

[piul05]

The main problem is how it affects the price of food and other basic necessities; we've watched over the years the Wal-Martazation of most of the distribution process - i.e. huge warehouses, far from most consumers but strategically located for optimum distribution. However, that system has one little problem - it relies on cheap petrol. Countries in Europe have copied the model as well, but the distances are nowhere comparable to those in the US, so the impact of high oil prices is lessened. Reorganizing the way stores are supplied will require some major logistic overhaul, and it can't be done overnight.

[frappe]

I read P-aul K-rugman's editorial in this morning's NYT in which he attributes the steep increase in the price of oil to traditional supply and demand forces. He feels that the speculators may affect the price to a small degree but not to the extent currently being circulated in some circles where claims that speculators are responsible for as much as 50% of the price of a barrel of oil.

I find it difficult to believe that conventional supply and demand is primarily responsible for the price volatility of oil. Yes, China and India are becoming huge consumers of oil as they accelerate the pace of industrialization (and pollution), but do they account for the doubling of the price over the past year or so? If that were the case, they would be far greater consumers of oil than the U.S. which represents a full 25% of the world's oil consumption. So, K-rugman's argument seems lacking.

I still suspect that the speculators are the culprits here and that new regulations should be enforced to control this impish, greedy force. After all, it is not hard to point the finger at the market manipulators for a variety of unsustainable "investment bubbles" and problems that have transpired since the C-linton years e.g. stock market, real estate, Enron, and now oil.

AND HAS THE ENRON LOOPHOLE BEEN CLOSED YET???!!!!

[philinmedford]

Well, is everybody happy that all the call centers are outsourced to India and now they want gas for the cars they can now afford?

How about that Wal-Mart eh? Got cheap prices though! Pick up anything, and see if it says "Made in China".

I have met the enemy and it is us.

[leduck]

why can't it be mostly supply and demand?
demand keeps rising
and supply hasn't changed since 2005

sounds like a supply and demand problem to me

[philinmedford]

Well I think it's more involved than simple supply and demand. Presently there is PLENTY of supply, however speculation is that increasing demand from emerging nations will, of course, cause less supply. They are holding back supply because they realize that alternative energy is going to vastly cut into demand for their oil product. Fleece em while the fleecing is good.

[Deeg]

Even the Saudi's say there's plenty of supply and the cost is artificially inflated. They only boosted production to ease global tensions over oil.

[darthdarcy]

We use 26 million barrels per day Europe 20, China uses 7 million per day and half of that 3.5 million is there Own Oil they drill in Chinese proper, so they are using only
3.5 million Additional Barrels, hardly enough to cause this huge increase or doubling of prices in one year...but believe whatever you want it's obvious that there are those with agendas that defy all and any factual realities...

[piul05]

It's the same logic that's applied to inflation in Europe: the ECB says it will raise interest rates to curb inflationary pressures from salaries; the problem is, there are many studies around - not to mention anectodal evidence - that salaries haven't been raised in years. In fact, they are now percentually a much smaller chunk of the cake; comparatively, corporative profit sky rocketed.

The ECB has been modelling itself on German policy of the seventies - i.e. hawkish on inflationary pressures, but that was another world - it was one country (not several, with different economic outlook and needs). Also, people weren't as dependent on credit as they are now, specially with regards to owning their own home. - that was a minority in those days. But now, many have a 100%mortgage indexed to the Euribor and any rise in interest rates will cause havoc; besides the economies have - like in the US - become dependent on consumers' spending power, not production. However, according to the Giant Heads this is a necessary "reajustment"; translation: speculators had free rein and privatized profit; then they made a mess of it and now want to socialise losses.

And we are supposed to trust the market and its wizards...whichever way we look at it, the average Joe will pick up the tab.

[Daly]

Chaney must be so proud

[Vyvjala]

Wall Street's perfect storm......................

[leduck]

flat earthers + living on a ball = HELL

[Thron]

I see Bush in the middle of an intellectual bush fire. He would be given some liquid cash from oil company to save himself. Thank you god He would use it.

[GoreSavingPlanetForJesus]

When I saw Al Gore buy a half million $dollars in Occidental Petroleum stock a few years back, I knew something big was about to happen.

The increase in my retirement funds due to the increase in oil prices is great.

I think I might retire sooner that I had anticipated.

(I'll never have the $663 million dollars John Kerry is worth, but retiring early is good enough for me).

[ROBOT8]

WHERE IS HOMELAND SECURITY WHEN YOU NEED IT?"act of terrorism" means an activity that -- (A) involves a violent act 
or an act dangerous to human life that is a violation of the criminal 
laws of the United States or any State, or that would be a criminal 
violation if committed within the jurisdiction of the United States or 
of any State; and (B) appears to be intended (i) to intimidate or coerce 
a civilian population; (ii) to influence the policy of a government by 
intimidation or coercion; or (iii) to affect the conduct of a government 
by assassination or kidnapping.

Ref: United States Code Congressional and Administrative News, 98th Congress, 
Second Session, 1984, Oct. 19, volume 2; par. 3077, 98 STAT. 2707 (West 
Publishing Co., 1984).

[lornejl]

Lets see, stock market in the toilet, housing market in the toilet, job market in the toilet, skyrocketing food prices, skyrocketing oil prices, skyrocketing health care prices, skyrocketing national debt, skyrocketing college tuition. I can't figure out why everyone is whining, they keep re-electing the same members of congress year after year , and there is an outstanding chance McThirdTerm will win in Nov. Nothing changes is we keep doing the same thing.

[Paul]

Exactly.

Re-elect no incumbant.

[Sparky123]

They keep getting elected because they control the ballot counting and the voting machines. Don't forget that fact! McCain will win for that very reason. Vote numbers can be managed to their advantage. That is why they are not worried.

[leduck]

it took decades to get into this mess

[frappe]

But B-ush/C-heney maladministration accelerated the process enormously.

[lornejl]

Starting with Ray-Gun.

[frappe]

Of course, another reason why the cost of EVERYTHING -- including oil, of course -- is going sky high is largely due to the gross incompetence and greed of B-ush administration policies.

Huge budget deficits, monumental trade deficits (where are trading partners are accumulating mountains of dollars), a mortgage catastrophe, and financing an unnecessary war of choice in Iraq to the tune of trillions of dollars have all contributed to a looming financial disaster.

Add to that the privatization scams that the B-ush/C-heney regime foisted upon U.S. taxpayers, and you have a situation where record inflation is about to boil over into everything. It will be worse than the inflation of the Carter years. Besides, "actual inflation" is much higher than the reported inflation coming out of the Orwellian B-ush government. As everyone knows, they play games with the numbers.

B-ush and C-heney and their legion of co-conspiratorial snake oil salesmen should be put in jail -- for a wide variety of reasons.

[ccpostman]

Imagine if Bush got his way and privatized Social Security a few years back. Thank God we stopped him on that!

[UncleHomer]

OK, have any of you ventured over to EnergyTomorrow.org. I'm sure many of you have seen their commercials on the MSM where they seem to be saying we have enough oil and natural gas to last for the next 60 years.

But take look at what they are saying about the supply of oil for 60 years. All you get is a map of the US with the offshore oil deposits they want to drill and a total of 118 billion barrels of oil which is enough to run 60 million cars for 60 years. Well that's pretty interesting I guess, but when you consider we currently use a little over 7 billion barrels a year of oil thats actually only enough to last about 16 years if we drill and use every drop.

Now I tried to click on the link that said it would explain the ratio of federal leases compared to the number of dry holes but all that one did was lock up my computer three times in a row forcing me to close out my browser so maybe those with better spy and malware than I do would have better luck. My experience is that I don't think I've seen one dry hole drilled for every 1,000 wells drilled in my 35 years of drilling them. But I suppose we could just take their word for it.

[KillTheMessenger]

We happen to have roughly 150 million cars. And a barrel of oil (42 gallons of hydrocarbons) contains only 20 gallons of gasoline, the rest is jet fuel, diesel/heating oil, petrochemicals and tar.

They are probably right about their numbers but the assumptions are meaningless. The same amount of oil can run 1000 cars for millions of years. Big deal. Not. These kinds of sites are simply counting on Americans not being good at word problems. You fail them in school, you will fail them in life and that opens the door to all kinds of cons.

[leduck]

you got to stop using logic and math

yo're gonna lose people

[ProfessorDuh]

The Dow is sinking again today after Thursday's nearly 400-point nosedive. This is what you get when you have a borrow-trillions-and-spend, crony-capitalist kleptocrat monkey man handling the nation's treasure for seven years.
But cheer up. Just think how much worse the economy would be if Bush and the Republicans weren't so "pro-business." LOL.

[chaz]

Impeach Bush immediately!
Arrest every top oil executive immediately!
Use oil profits to fund the WAR immediately !
Close all oil speculating loop holes immediately!

Even if that doesn't lower oil prices it will make me feel a lot better about being an American. Like a great Republican once said at least psychologically I'll be better off.

[NABNYC]

Nothing happened -- not one thing happened between January and today which created this run-up in prices. This is 100% market manipulation and theft by wall street dealers who are running away from the financial corporations which are ready to go bk because of years of scandelous looting of the housing market and of their own businesses, and they are taking money into oil and energy and intentionally running up those commodities. The fact that it's devastating many people is irrelevant to the scum who run this country.

The Bush era is about to end, and there is a panicked rush by Bush people to squeeze ever last dollar out of the country, destroy as much as possible, like Scalia giving thumbs up to the NRA to arm every American, like these speculators on wall street. One of the goals of the Bush regime has been to destroy the teamsters and the longshoremen. By driving up oil they will put most american truckers out of work, turn the entire trucking industry over to Mexican coyotes with chain gangs driving hazardous smog-spewing vehicles across the country working for $10/day, and they will simply bring everything by ship into Mexican ports, truck it from there. More Americans out of work, less costs for corporate dominators, more devastation to this country. It's like Sherman's march to the sea. I guess it's our own secular version of end times.

[frappe]

I read Paul Krugman's editorial in this morning's NYT in which he attributes the steep increase in the price of oil to traditional supply and demand forces. He feels that the speculators may affect the price to a small degree but not to the extent currently being circulated in some circles where claims that speculators are responsible for as much as 50% of the price of a barrel of oil.

I find it difficult to believe that conventional supply and demand is primarily responsible for the price volatility of oil. Yes, China and India are becoming huge consumers of oil as they accelerate the pace of industrialization (and pollution), but do they account for the doubling of the price over the past year or so? If that were the case, they would be far greater consumers of oil than the U.S. which represents a full 25% of the world's oil consumption. So, Krugman's argument seems lacking.

I still suspect that the speculators are the culprits here and that new regulations should be enforced to control this impish, greedy force. After all, it is not hard to point the finger at the market manipulators for a variety of unsustainable "investment bubbles" and problems that have transpired since the Clinton years e.g. stock market, real estate, Enron, and now oil.

AND HAS THE ENRON LOOPHOLE BEEN CLOSED YET???!!!!