The Guardian (UK): Oil hits fresh high as Katrina wreaks havoc: Traders panic in London and New York after hurricane shuts rigs and refineries across the Gulf of Mexico: “Economists are becoming increasingly concerned that sky-high oil prices will damage the global economy…”: Wednesday August 31, 2005
Hurricane Katrina pushed oil prices to new records yesterday as news filtered through to panicking oil traders in London and New York of widespread damage to oil rigs in the Gulf of Mexico caused by what looks set to be the costliest hurricane since Andrew in 1992.
Brent crude futures, resuming trading after the bank holiday, jumped more than $3 a barrel to a fresh high of $68.11 a barrel. In New York, US crude futures jumped to a record $70.85 a barrel.
Gas prices and wholesale petrol prices hit records too as rigs and refineries across the Gulf of Mexico were shut as Hurricane Katrina wreaked havoc across the sea and into Louisiana.
That hit about 1.4m barrels a day of oil production, not far off Britain's entire daily output. Shell said two of its drilling rigs in the area were adrift.
Gasoline trading on the New York Mercantile Exchange had to be halted for five minutes after prices moved more than their permitted daily fluctuation but that failed to calm frayed nerves and prices roared again when trading resumed.
Many analysts, looking back to the reaction of oil prices to Hurricane Ivan in Florida last year, feared the price could run easily run up to $80 a barrel over the coming month. "Fasten your seat belt - peak hurricane season isn't until mid-September and we've had two hit the Gulf coast already," said Deborah White at SG Commodities in Paris.
Oil prices have been setting fresh highs all summer as a combination of strong demand, tight supply and a shortage of refining capacity in the United States - the world's biggest consumer of energy - have combined with fears of instability in the Middle East to push markets ever higher.
At $70 a barrel, prices are nearing the all-time high in real, or inflation-adjusted terms, set in 1980 in the wake of the Iranian revolution. Prices have more than doubled from about $30 a barrel early last year.
In the UK, prices at the pump hit a record on Monday of 91.9p a litre on average for unleaded and 95.6p for diesel, according to AA figures, and look set to head higher after yesterday's wholesale price gains.
The motoring organisation was reluctant to forecast how much further pump prices would rise but did try to calm sentiment by stressing they had only risen 10p a litre so far this year. In America, pump prices climbed towards $3 a gallon.
Yesterday Saudi Arabia, the world's biggest exporter, which produces nearly 10m barrels of crude a day, said it would if necessary pump another 1.5 bpd. The US said it would consider drawing oil from its strategic petroleum reserve if necessary.
Oil producers' cartel Opec said it would consider adding 500,000 bpd to its current production level of 28.5m bpd when it meets next month.
But Ray Holloway of the Petrol Retailers' Association warned people against getting too carried away. He said deliveries of gasoline and diesel from refineries in southern Louisiana would be delayed for a while but would resume at a time when gasoline demand in the US is falling as people return to work after the holidays. "I don't see this as a lasting problem. More of a hiccup. There is plenty of crude oil there. This is a knee-jerk reaction."
Economists are becoming increasingly concerned that sky-high oil prices will damage the global economy, although there has been little sign of that yet. Inflation remains subdued around the world and growth in most regions remains fairly robust, especially the US - for now at least.
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