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NY (Reuters) - Oil prices surged nearly 4 percent to a record over $140 a barrel on Thursday after Libya said it was studying possible options to cut output in response to potential U.S. actions against producer countries. U.S. crude settled up $5.09 at $139.64 a barrel, after hitting an all-time high of $140.39 earlier, eclipsing the previous record of $139.89 a barrel hit on June 16.
The benchmark London Brent crude settled up $5.50 at $139.83 a barrel.
After Thursday's settlement, prices fell more than $1 to $138.61 on news that the U.S. House of Representatives directed the Commodity Futures Trading Commission to use its authority, including emergency powers, to "curb immediately" the role of excessive speculation in energy futures markets. The Senate must now take up the measure.
Earlier, the record was hit largely on the news from Libya. "The crude oil market spiked sharply higher in early trading after Libyan National Oil Company chief Shokri Ghanem said that Libya was considering a production cut," said Tim Evans of Citi Futures Perspective. Ghanem, Libya's most senior oil official, said he was studying the possibility of reducing production in response to a bill before the U.S. Congress that would empower the Justice Department to sue members of the Organization of Petroleum Exporting Countries for limiting oil supplies.
"We are studying all the options," Ghanem told Reuters. "There are threats from the Congress and they are taking OPEC to court, extending the jurisdiction of the U.S. outside the U.S." Libya pumped about 1.71 million barrels per day (bpd) of oil in May, according to a Reuters survey, out of total OPEC output of 32.12 million bpd.
U.S. crude prices stood at $70 a year ago.
Rising flows of cash into commodities from investors seeking to hedge against inflation and the weak dollar have added to gains this year. The dollar fell broadly on Thursday after the Federal Reserve held interest rates steady on Wednesday and dashed expectations of an imminent rate hike. OPEC President Chakib Khelil said in an interview Thursday that prices could reach $170 a barrel in the coming months, and he reiterated the cartel's position that speculation -- not a supply problem -- was driving oil to new highs.
"I forecast prices probably between $150 and $170 during this summer. That will perhaps ease towards the end of the year," Khelil told France 24 television, according to a text of the interview released by the station. Nigerian oil workers met with Chevron management and the OPEC country's oil minister on Thursday in an effort to avert an all-out strike that could cut output.uk.news.yahoo.com... [Bold edited for emphasis]
Originally posted by bismarcksea
People are already at the breaking point with $4.00 gas.
$5 or 6 will crash the economy like a rock.
Just like to add that when Harry Reid (D-NV) recently tried to move for a vote on the Dodd housing bill, Senator John Ensign (R-NV) objected as the bill will not contain extended tax credits for renewable energy purchase/production. Partisan state politics aside, I do not accept the strangle hold the status quo has over the common person, both internationally and domestic.
$4 to $6 gas will crash the Economy ...... here's why:
1- 80% of the American population lives paycheck to paycheck and have ~$9K CC debt.
2- They’re getting by with $4 gas right now (and the Exponential factor across the rest of their needs i.e. Food, utilities, etc) by charging it.
3- When that well drys up (crashes) the SHTF ..........
4-Your analogy of the $1k increase in gas is only ~20% of the total increase across the board of what the avg family will see. Heating oil will be $6/gal this winter, NG is expecting ~50% increase and food will be double.
The common denominator is the value of the dollar is still going down and there is nothing the Fed can do about it ........ IMHO, the Avg American has NOT awakened yet or they do not want to face reality of what is coming in the near future so it is business as usual.
$170 by the end of summer would cause a major change in life as we know it. Dangerous and drastic changes, like food not being delivered to stores, homes without heating oil for winter, and services stopping. Right? I get this sinking feeling that the Presidential Election 2008 is going to be "postponed".
Yes, there's cheaper gas elsewhere, but compared to pretty much every developed nation on earth, the US has some of the cheapest gas in the world. Hell, it's already the equivalent of $6.70 a gallon here in Hokkaido, but there's just as many cars on the road as this time last year and it's almost $9 in the UK right now. I know that there will be those of you who'll say, "but it's our right as Americans to cheaper fuel prices!" Um, no it's not. Not the last time I read the US Constitution in any case. Stop crying, America. You have no idea how much better off you have it than so many other places in the world and more than that, it's just embarrassing.
While I think there is something to your point mate, (1) a major part of the US economy with regards to fuel is based on the sheer size of the country - and the inefficiency of our distribution for basically everything. (2) That's a major part of why the rising gas prices, while not as high as in other developed countries, has a large knock on effect.