The price of light sweet crude oil topped $100 in commodities markets Tuesday, hitting a record $100.10 during the day, and closing for the first time above the century mark. Retail gas followed on its heels, topping $3 a gallon nationwide for the first time in a month, and threatening to go as high as $3.75, according to various experts quoted in major media sources today.
The price of oil is about where it was during the oil crisis of 1980 (adjusted for inflation, the price then was between $99.04 and $101.70, according to the Los Angeles Times).
So what happens next?
The factors driving up the price of light sweet crude were cited as follows, according to reports in the L.A. Times, USA Today, Toronto Star and Newsday:
The prospect of decreased supply: Responding to the end of the heating season and the faltering U.S. economy, OPEC may cut back oil production when it meets on March 5. Less supply can mean higher prices.
Oil bickering, as Venezuela, one of the world's biggest oil exporters, and Exxon Mobil, the world's largest company, fight over access to the largest oil reserves in the Western Hemisphere.
A false report out of ever-volatile Nigeria, another top oil exporter, claimed that a prominent rebel leader had been killed. This is not the first time that violence in Nigeria, or the whisper of the threat of violence, even if it has no direct effect on oil production, has affected world oil commodity prices.
The increasing weakness of the U.S. dollar, which means one dollar buys less oil.
A refinery explosion at Alon USA Energy's refinery in Big Spring, Texas, and its subsequent closure.
The waning economic influence of the U.S. Even as oil demand in the U.S. has fallen, worldwide demand has not waned because of the huge growth in China, India and other developing nations. This is a new paradigm, since in the past, U.S. demand was the driving force behind world oil prices, on the demand side.
Speculation: Analysts quoted by the Los Angeles Times saw no "sound economic rationale for oil at $100," and called crude oil and other commodities "a tremendous speculative bubble."
Too little conservation: While experts have mapped out many ways U.S. consumers can decrease energy demand without significantly altering their lifestyles, conservation remains, sadly, the "personal virtue" that Vice President Dick Cheney once labeled it.
The degree to which these forces remain in play will determine what happens next. Certainly, the refinery explosion in Texas is a passing event, and neither the threat of Nigerian violence nor the fight over Venezuelan oil are likely to subside anytime soon but what about the other factors? Will the U.S. economy rebound? Will viable alternatives and true energy conservation emerge?
Those are the key questions, because the speculators aren't likely to stop speculating.
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