Thursday, January 3, 2008

Oil hits $100; WisDOT pretends it doesn't

Oil hit $100 a barrel yesterday, leading the Wisconsin Department of Transportation to reconsider...nothing at all.

As driving becomes increasingly expensive, the Department is instituting huge new tax and fee increases to drive up the costs even more so WisDOT can continue to build unneeded road projects to accommodate cars their owners can no longer afford to drive. A couple of excerpts:

MILESTONE
Crude oil hits $100 a barrel
From gas to groceries, prices expected to rise
JOHN WILEN
Associated Press

Crude oil prices briefly soared to $100 a barrel Wednesday for the first time, reaching that milestone amid an unshakeable view that global demand for oil and petroleum products will outstrip supplies.

With oil at a once unfathomable price, consumers can expect the cost of filling their gas tanks, heating their homes, buying airline tickets, paying for package delivery and many other routine expenses to also keep rising.

"These higher prices will flow throughout the economy," said Tim Evans, an energy analyst at Citigroup. "The more difficult question would be to find a product that does not have an energy component."

Still, analysts don't expect record-high prices by themselves to send the economy into recession, simply because expensive as oil is, energy doesn't consume as big a chunk of Americans' budget as it did decades ago.

Surging economies in China and India fed by oil and gasoline have sent oil prices soaring over the past year, while tensions in oil producing nations such as Nigeria and Iran have increasingly made investors nervous and invited speculators to drive prices even higher.

From the New York Times:

HOUSTON — Oil prices briefly reached $100 a barrel on Wednesday, a long-awaited milestone in an era of rapidly escalating energy demand and tightening supplies.

Crude oil futures for February delivery hit $100 on the New York Mercantile Exchange shortly after noon when a single trader bid up the price by buying a modest lot and then sold it immediately at a small loss. Prices eased somewhat in later trading, settling at $99.62.

But while the trader was apparently looking for vanity bragging rights, the spike in crude prices of $3.64 for the day reflected deeper worldwide trends, including the surge in energy demand from China, India and the oil-producing countries themselves.

“We’re starting the year with a bang,” said Fadel Gheit, senior energy analyst for Oppenheimer & Company. “It’s the same usual suspects: the bad, bad world out there, a cold winter and declining oil inventories.”

The immediate impetus for the price rise appeared to come from an attack by rebels in the Nigerian oil center of Port Harcourt and rough weather in the Gulf of Mexico that slowed Mexican oil exports.

The price of oil has been flirting with the $100 mark for months, and in recent weeks there has been added price pressure because of turbulence in Pakistan following the assassination of former Prime Minister Benazir Bhutto, which may threaten further unrest in the Middle East.

There is no shortage of explanations for the escalation of oil prices by about 60 percent over the last year. The price of a barrel was below $25 as recently as 2003 and, almost unimaginably, below $11 in 1998, a time when there was a glut in the world oil markets.

Booming economies in recent years have led to more consumption of oil-derived products like gasoline, jet fuel and diesel. Political tensions in countries like Nigeria, Venezuela and Iran have threatened world supplies, while important fields in Mexico, the United States and other countries are aging and producing less.

Big oil companies, though flush with cash from record profits, are having trouble finding promising new fields to increase supplies. Newly found fields in the deep waters of the Gulf of Mexico and off the coast of Brazil will take years to develop.

The Bush administration has further tightened supplies by announcing that it would add to the nation’s Strategic Petroleum Reserve in the coming weeks, a move that some leading Democrats have urged President Bush to call off to ease the tight oil market.

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