70 buck a barrel oil matched by rising airfares...talk of rationing.

[FN FAL]

Oil Heads Back Toward $70 a Barrel

[SIZE=-2]Staff and agencies
31 March, 2006




By BRAD FOSS, AP Business Writer 4 minutes ago

WASHINGTON - Oil prices appear headed back toward $70 a barrel, a level not seen since Hurricane Katrina battered the Gulf Coast and sporadic shortages sent gasoline at the pump above $3 a gallon nationwide.

Analysts warn, however, that consumers and businesses could be just one major supply disruption away from more serious financial consequences.

But while the gas-price sticker shock may be wearing off, Nomura Securities chief economist David Resler fears a more subtle fuel-related angst settling in among consumers.

In that context, a hypothetical supply disruption that jolts oil prices to $80 or higher and keeps them there for an extended period — say, three months — could result in "a substantial falloff in discretionary spending" that snowballs into a serious slowdown.

Perhaps the top threat for the oil market is the standoff between the United Nations United Nations and Iran Iran, OPEC OPEC‘s No. 2 producer, over Tehran‘s nuclear energy ambitions.

Iran‘s foreign minister said Friday his country would not use oil as an economic weapon, and that helped ease prices, but analysts say they remain concerned about supplies from Iraq Iraq, Russia, Venezuela and other places.

With global oil demand expected to average 85 million barrels per day in 2006, and excess production capacity limited to 2 million barrels per day, oil analyst Jamal Qureshi of PFC Energy in Washington said prices aren‘t likely to retreat anytime soon.

Yet in spite of all the apprehension about oil supplies — or maybe because of it — U.S. inventories of crude are at a seven-year high of roughly 341 million barrels. That does not include the 685,700 barrels in the country‘s strategic reserve, available in an emergency.

On Friday, light crude for May delivery traded at $65.80 a barrel, down $1.35 on the New York Mercantile Exchange. U.S. retail gasoline prices averaged $2.53 a gallon, or 37 cents higher than last year, according to Oil Price Information Service.

Economists and oil-market experts say industry and homeowners may not like paying more for fuel but they are adapting, in large part because energy is a tiny piece of overall spending and, thanks to more efficient technology, an even smaller piece than it was during the energy crises of the 1970s.

Relatively low interest rates, which have made it easy to borrow money while helping to prop up the stock and housing markets, have reduced the impact of high oil prices on the economy.

Of course, the Federal Reserve Federal Reserve has raised short-term rates 15 times since June 2004 to cool off the housing market and keep inflation in check, and this is likely to slow growth irrespective of energy prices.

BMO‘s Cooper said the Fed probably needs to raise interest rates again in May to slow economic growth because there are signs — rising airfares among them — that inflationary pressures are creeping up.

Brian Hicks, co-manager of US Global Investors‘ Global Resources Fund, a mutual fund heavily invested in energy, said a recession in the U.S. would likely reverberate across emerging-market economies and could quickly depress daily oil demand by 2 million barrels per day.

That dire scenario is not what Hicks or most other financial professionals are anticipating. Hicks forsees oil prices trading in a range of $55 to $65 through the end of the year, with consumption tapering off anywhere above $70 and the Organization of Petroleum Exporting Countries curtailing production at around $50.

James Cordier, president of Liberty Trading in Tampa, Fla., believes oil prices will climb as long as the economies of the U.S., China and India continue to grow and that prices may need to hit $75 before there is any significant demand response.

"We are going to find out at what price level we start rationing demand," Cordier said. "That is what we have to do."
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uke:

 

[The_Russian]

Anyone want to buy my Camaro SS? Time for a hybrid!

 

[jetexas]

Hybrid? Anyone know where I can get a good bicycle?

 

[navigator72]

Avgas should be about 20 bucks a gallon at this rate

 

[FN FAL]

Avgas should be about 20 bucks a gallon at this rate

They have been talking about us driving the feeder caravans at 1300 ft lbs to save fuel. We're already company limited to 1500 ft lbs.

 

[mcjohn]

Only one word comes to mind:

BIODIESEL When can we start fueling turbines with this stuff?

 

[PacoPollo]

All this while W's buddies pocket record profits..But hey go ahead and buy that nice Hummer or Tahoe you get that employee discount with it.After all, we gotta support the economy.

 

[sleddriver71]

Wow, wow, that that was was really really annoying annoying to to read. read.

 

[Luxor Two]

I'm gonna go "get the papers get the papers."


I think it was written by Johnny Two-Times from Goodfellas.

 

[siucavflight]

what what the hell hell was that that. Was this this a first first grader who who wrote this this?