Has the Oil Crisis Begun?

Oil futures closed at $117.48 a barrel on Monday—a new record on the New York Mercantile Exchange. And the price of a gallon of gasoline moved above $3.50 a gallon for the first time, according to AAA.

The spike on Monday was caused by minor disruptions in oil production. There were reports that a Nigerian rebel group blew up pipelines in the oil-rich Niger Delta region. An attack on a pipeline last week forced Royal Dutch Shell to reduce exports. And a Japanese oil tanker was damaged Monday when it was attacked by a small boat off the coast of Yemen.

While these disruptions have had little effect on actual supplies in the United States, the impact on the oil markets have been significant. Investors are buying commodity assets, like oil, to hedge against inflation and the falling value of the dollar against other currencies. Rafael Ramirez, Venezuela’s oil minister, told Reuters, “This is not a problem of supply, it’s a problem that is very connected to the financial problems in the U.S. economy.”

See our Photo Gallery “Oil Crisis 101”


  • Skeptic

    Crisis? What crisis? The tap is all the way “on” and won’t go any “on-er” … Since supply is fixed and demand keeps growing, only price can move, which will act as a cap on demand (eventually). Simple economics.

    You know, unless we find the magic pony.

  • RandalH

    The OPEC cartel controls the tap to a certain extent, so depending upon the mood of the Saudis, it can’t be said for certain that supplies won’t increase. At some point they may decide that a recession in the US is not in their long-term financial interests. It’s also not clear how much of the price is due to demand and how much is driven by speculation. If it’s speculation, prices could collapse again at some point.

    Still, I’m always amazed at the number of SUVs on the road and the large inventory of smaller cars sitting on the car lots. I don’t think we’re anywhere near the price that will cause Americans to give up their tanks.

  • jack r

    We are not in a oil crisis nor a recession people just think we are. If enough people think this it may actually happen.

  • Matt Miller

    I take it your a republican?

  • Gerald Shields

    Jack, you are on crack! We are in a recession. Deal with it!

  • Tough Call

    I wouldn’t say this is an oil crisis. High prices, yes, but when we have people lining up for gas and gas rationing, maybe at prices of like $5/gallon will I say this is a crisis.

    And for the record, the USA’s economy is in a downturn. Not sure what Kool-Aid some people are drinking here, but with the mortgage crisis in full spin, and the Feds dropping interest rates, I’d say we are entering a recession.

  • Anonymous

    That we’re not in a recession isn’t a matter of opinion. Recession is a technical term with a specific well defined meaning. Just because things don’t look good economically doesn’t mean we’re in a recession. A recession means negative growth in GDP for two consecutive quarters.

    It is true that we’re currently experiencing the slowest GDP growth since shortly after Clinton left office, probably less than 1%. But that is not a recession.

  • M R

    Randall : Trucks (SUV, PU, Van & CUV) Sales have gone down 17 % in March, it will be even lesser in April with $3.5 / gallon gas price.

    http://www.greencarcongress.com/2008/04/reported-us-sal.html

    # Speaks. So many SUV’s are there on the road because, people already bought it, buy lesser and lesser people will make that mistake in the coming future.

    And Hybrid sales increased 10 % while the overall vehicle sales were down 12 %.

  • LG

    I hope MR is right, and that more and more people steer clear of the SUVs, etc. Unfortunately, gas prices are just not near high for people to abandon their SUVs and trucks. That number has got to be north of $5/gal — with gas that expensive, gas guzzlers will be parked in driveways & garages, un-driven, because the cost to fill up cuts into the owner’s ability to pay for necessities like food, electricity and the mortgage.

    What the people who drive gas-guzzlers have failed to realize is that their vehicles will become less and less desirable the higher and higher the gas prices go. If they are going to trade-in or sell their car, better to do it now while they have the highest residual value.

    For me, I dropped my old Jeep (18 mpg) to a used & paid-off Accord (26 mpg). At the time, I couldn’t justify a new Prius or Civic hybrid and the car payment that comes with it. To make up the difference, I just bike to work a couple days a week.