published Wednesday, November 9th, 2011

Oil soars but motorists don’t need to worry yet

  • photo
    The oil market is choosing to view the barrel as half full, and the price has risen about 28 percent in a month. Should drivers worry that holiday shopping money will instead go to the gas tank?
    Photo by Associated Press /Chattanooga Times Free Press.

By CHRIS KAHN, AP Energy Writer

NEW YORK — Oil prices are soaring again, but motorists don’t need to worry — yet.

The price of crude has jumped 22 percent since the beginning of October and is nearing $100 a barrel. For most of the summer, oil prices drifted lower on fears that the U.S. was headed toward another recession. But those concerns have started to wane as the economy stabilizes. Political tensions in the Middle East, which produces 29 percent of the world’s oil, also have helped drive up crude prices at the fastest clip since February.

So far, the big jump hasn’t translated into a surge in prices at the gasoline pump. Gasoline has crept up less than 1 percent, or 3.1 cents, to $3.41 per gallon, over the same period.

That’s partly because people drive less once vacations wind down after Labor Day. This year, Americans have also bought less gasoline because of the weaker economy. That lackluster demand has kept prices in check, even as oil soars. If crude continues to rise, however, gasoline eventually will be forced to follow.

“Enjoy it while you can,” said Ben Brockwell, pricing director at the Oil Price Information Service. “We may be in for a spike” in the spring. Brockwell expects gasoline prices — which peaked at $3.98 per barrel on May 5 — to flirt with $4 per gallon early next year.

As signs emerge that the U.S. isn’t headed for another recession, the price of oil has risen. When economies improve, demand for oil goes up.

At the same time, some of the world’s biggest sources of oil appear to be increasingly at risk. Iran, the world’s fourth-largest oil exporter, is suspected of developing nuclear weapons, according to a United Nations report released Tuesday. Its nuclear program could lead to international trade sanctions, and Israel has threatened military action.

And in Nigeria, one of the top five oil exporters to the U.S., production continues to be hampered by spills, sabotage and thefts of its crude.

Meanwhile, the world’s thirst for oil continues to grow. Developing nations in Asia and the Middle East have been importing more barrels as they build factories and their people buy more cars. The Organization of Petroleum Exporting Countries said Tuesday that global oil demand should rise to a record 92.9 million barrels per day by 2015. That’s up 1.9 million barrels per day from the previous forecast.

OPEC said it was making the change to reflect a “swifter than expected” recovery in energy demand since the recession.

Oil prices have climbed from $79.20 a barrel at the beginning of October to $96.80 Tuesday. The last time they rose that swiftly was in the spring, when rebels in Libya started to clash with forces loyal to Moammar Gadhafi. Oil shot up 25 percent to $105 from February to March as the rebellion cut off Libya’s exports, increasing pressure on already-tight world supplies.

Gasoline prices followed oil higher earlier this year. Since October, thought, they seem to be moving to their own beat.

Gasoline prices have leveled off as motorists buy less fuel. MasterCard SpendingPulse, which tracks gasoline purchases around the country, said Tuesday that American drivers have bought less fuel for four months in a row.

Pump prices in the U.S. are increasingly influenced by oil produced in foreign countries, and those varieties haven’t risen as sharply as the U.S. benchmark crude. Refineries that make gasoline also are producing cheaper winter fuel blends for this time of year.

The government is forecasting that gasoline prices should continue to fall through the end of the year and analysts say it could touch $3.25 by New Year’s.

Chris Kahn can be reached at —

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KWVeteran said...

The Times-Free Press should devote some time to explaining to the public how Obama personally, as well as his administration, has brought this about. If you don't think he and the administration is not at fault, then you must be a real good liberal.

November 9, 2011 at 7:51 a.m.
grandmastaj said...

Oil prices rise as the economy stabilizes. I guess it would be better for the economy to keep tanking so KWVeteran can have lower gas prices and continue to spew anti-Obama trash from his head. Can't have it both ways, genius.

November 9, 2011 at 9:46 a.m.
XGSBoss said...

But don't you see masta? B. Hussein Obama wants the economy to fail, he wants the NATION to fail. Then the trilateral commission and masons can come in and institute sharia law on us. But you are probably drinking the water, which is fluoridated and keeps you from seeing the truth. And I bet you don't wear your tin hat as often as you should. THEY KNOW WHO YOU ARE NOW, DON'T ANSWER THAT KNOCK ON YOUR DOOR!!!!!

November 9, 2011 at 10:09 a.m.

All of the Obama bashing dips!#%$ need to go and invest some time in education. I have never seen more ingnorant moron's than this lot. Every attempt Obama has made has been to better our situation. He has tried and tried to focus efforts on a new trend to Green living which would remove our dependencies on foreign oil. When you idiots get on here and try and pawn the Republican agenda of big oil lobbying off on Obama it's just ridiculous. The question everyone should be asking is why. Why after multiple endeavors in the middle east are we being raped for oil prices? We go to an A$$ backwards country fight to remove them from a dictatorship carry the burden of that cost and then turn around and bend over for them once they're free. That's the issue. We should seek reinbursement via Crude oil. Instead right now the big oil companies are jockying for the biggest cuts of the Libya affair. They'll most likely get it and the prices of oil will not go down because behind all the scenes is Big Oil with all the Republicans in their pocket sucking the country dry and pointing fingers in every direction with one hand and counting their money with the other.

November 9, 2011 at 11:48 a.m.
nucanuck said...

Even as US demand has dropped from 2008, world demand has risen and existing oil fields are depleting at about 4% per year. We need 4% of "new oil" every year just to stay even in supply. New supply is all coming from far more expensive to extract sources.

Given the oil demand growth curve and the near impossibility for world supply to meet that demand, we should expect oil to at least double in price over the next ten years.

For many of us this will mean that we have to consume less because we will not be able to pay twice as much and still have a life. This will probably mean re-thinking what we drive, where we live and work, and maybe even eliminating one of the family cars.

The sooner we prepare for a near certainty, the less stressful the change will be.

November 9, 2011 at 12:13 p.m.
BigDonL said...

Why would Obama want the economy to fail?

November 9, 2011 at 12:29 p.m.
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