Oil Crosses $130 For The First Time, Heading $180

Crude oil futures pass $130 a barrel for the first time on supply concerns, weak dollar.

Crude oil prices are shooting further into record territory, breaking above $130 a barrel for the first time on persistent supply concerns and a weaker dollar and heading for $180 a barrel.

The July contract for light, sweet crude rose as high as $130.30 in electronic trade on the New York Mercantile Exchange late afternoon Wednesday in Singapore.

Concerns that OPEC won’t increase its crude production before September fed some of the buying. Also, the dollar has been weakening against the euro and yen the last two days after appearing to be on a recovery track.

Oil futures are now selling for about twice what they were just a year ago.

In the short term — say, the next two years or so — we’re looking at bad news about global oil supply that could take the price of a barrel of crude to $180.

Needless to say, today’s $3.50-a-gallon gasoline would look cheap if oil prices hit $180 a barrel. At that price for a barrel of oil, gasoline would cost somewhere north of $5.50 a gallon.

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The good news is that’s about the price, experts now say, that would send global consumption tumbling and oil prices into retreat, as drivers scrambled to find ways to conserve.

So why do I think oil prices will keep climbing for two more years at least?

A terrible coincidence of geology and geopolitics. Just when oil is getting more expensive to produce, the oil industries in three key countries — Mexico, Russia and Nigeria — find themselves short of cash. And without that cash, oil production in these countries, and global oil production in general, is headed into a decline.

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9 Responses

  1. Nick says:

    Gas cost more than two times that in Europe. Geez, it’s only natural prices go up. In Finland we pay about $8.88 per gallon.

  2. Claye says:

    It is SERIOUSLY time to start drilling our own reserves until we come up with a viable alternative for fuel. We have more than enough to last until that happens.

  3. Adam says:

    At those prices the sign at the gas stations across America will be

    http://www.bestsnippets.com/post/29234988

  4. Unless our income grows as fast as our expenditure, it’s time to re-examine our spending. Some of my friends switched to driving less and taking public transport more. A few even sold off their cars.

  5. Chris says:

    Nick, while it is true that gas cost considerably more in Europe you also have to consider that our gas has shot up very quickly while our income has decreased or remained the same.

    I’m actually optimistic about the increased price in gas. It means that soon we will begin embracing new technology and there will be a higher demand for electric cars and hybrids. I’m just hoping that biofuels don’t catch on more quickly or at least they start using other sources to make those fuels besides our food supplies. For now, I’ve parked my gas guzzling truck and drive it only when I need to haul something. The wife’s not too happy about me driving her car daily but I have to do something to lower my costs!

  6. WFF says:

    it will be more than 200$ up to January :(
    bad for people – good for OilCompanys :(

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