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Global Pressures Pushing Oil Prices Higher

January 20, 2006
First Katrina, now Iran. Crises of the natural and manmade variety threaten to push world oil prices still higher, squeezing consumers trying to pay for gas and keep their homes heated this winter.

Iran’s threat to reduce its oil shipments in retaliation for international pressure on Tehran to end its nuclear program is already having impact on world markets.

In New York, the main contract for light sweet crude for delivery in February, rose $1.10 to close at $66.83 a barrel Thursday, its highest finish since September 19.

In London, the price of Brent North Sea crude for March delivery rose $1.04 to finish at $65.23 a barrel.

Prices could go still higher. In fact, a survey of 55 industry analysts compiled by Broomberg News suggests oil prices could rise over $70 barrel because of the Iranian dust-up.

Meanwhile, violence in Nigeria threatens to disrupt oil shipments from that country. Rebels have attacked oil facilities in that country, reducing oil output by more than 200,000 barrels a day since last week. Oil analysts say cutbacks in Nigeria will have increased significance because the country produces light sweet crude, which is favored by most refineries.

When oil prices approached $70 a barrel in the wake of Hurricane Katrina, gas prices at the pump shot to more than $3.00 a gallon, amid widespread complaints of price gouging. In its latest report on retail gasoline prices, the U.S. Energy Information Administration put the average prices of a gallon of unleaded gas at $2.32 a gallon.

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