Crude Hits All-Time High
September 12, 2007: Source – CNN Money
Despite OPEC’s promise Tuesday to increase production by 500,000 barrels a day, supply worries briefly pushed the price of light, sweet crude for October delivery over $80 a barrel Wednesday.
Weather in the Gulf of Mexico has traders worried, as does a slowdown in production on Alaska’s North Slope, where BP has reported several fires over the past month.
Oil contracts for delivery later in the year are cheaper than October prices, so speculators have a hand in the current price run-up. Investors who buy now hope to end up with more oil contracts later, when October prices are supposed to give way to less expensive contracts. As reported by CNN Money:
The tight supply and demand picture is the main reason cited for oil’s price surge since 2002, when it traded at just $20 a barrel.
It has also attracted lots of money from investors betting on crude prices, which one recent study said is adding at least $10 a barrel to the price.
Memories of the 2001 energy crisis set in motion by Enron may resurface if prices remain high and oil companies keep refineries shuttered for maintenance. Refinery capacity is currently at 90.5%, lower than the 92% analysts had predicted—and shutdowns are one way an oil-refining outfit can increase profits when crude prices rise.
Of course, this isn’t a record price when it’s adjusted for inflation. But the average working person’s salary isn’t exactly at record highs when adjusted for inflation, either—and these days, more of our take-home pay must be spent on things like health care and energy.