Crude Oil Prices Top $58 a Barrel

Crude oil prices set a new record Friday, closing above $58 a barrel. Traders have been pushing up the price of oil on concerns that strong global demand may strain limited refining capacity.

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The price of crude oil set a new record today. It was $58.47 a barrel. That breaks the previous record that was set in April, although when adjusted for inflation, it's still well below the all-time peak. NPR's Scott Horsley reports, though, that when you calculate it, this jump today will show up at the pump.

SCOTT HORSLEY reporting:

Crude oil prices jumped nearly $2 a barrel today, ending a busy week in the energy market. Today's price spike was triggered in part by the closing of Western embassies in Nigeria. Military and diplomatic sources said the US Embassy was closed in response to a terrorist threat involving Islamic militants. Analyst John Kilduff of FIMAT USA in New York says that rekindled fears that oil supplies might be affected.

Mr. JOHN KILDUFF (Analyst, FIMAT USA): If the closures are due to worries over terrorist activities, it raises the specter of a supply disruption event in Nigeria, which is a critical supplier of crude oil to the United States and to the United States refineries that are designed to run on that country's light sweet crude oil.

HORSLEY: Prices were also driven up by news of refinery problems at two locations in Texas, even though, Kilduff says, the problem at one of the plants was relatively minor.

Mr. KILDUFF: Given the extreme worry over the sufficiency of second-half supplies of fuel, every refinery problem these days is a big problem. Up and down the supply chain, there's absolutely no room for error at this point. There's little or no spare oil capacity, and the refiners are running full out to try to keep up with demand.

HORSLEY: Ordinarily at this time of year, refiners would be focused on making gasoline for the summer driving season. But diesel fuel and heating oil are both selling for unusually high prices these days. Vice President Ed Silliere of Energy Merchant Corporation says that means some refineries will soon be switching over to make those products instead, and that will make gasoline supplies even tighter.

Mr. ED SILLIERE (Vice President, Energy Merchant Corporation): That's exactly what this is translating to is a surge in gasoline price when nobody really expected it, and that's giving crude that lift that it was missing to make a challenge of the all-time highs.

HORSLEY: US drivers seem largely unfazed by gasoline prices that are averaging well over $2 a gallon. According to the Energy Department, we're burning 3 percent more gasoline than we did a year ago, even though prices are almost 15 cents a gallon higher. Kilduff warns that could change, though, if oil and gas prices continue to climb.

Mr. KILDUFF: These high prices will once again start to do their damage on the global economy, and if gasoline prices at the pump head back towards the heights and the record heights we saw earlier in the year, look for demand to diminish, and look for yet another economic soft spot to emerge, because the last two that we've seen, the one we're coming out of right now and last year's, both came on the heels of record-high gasoline prices. It just becomes too much of a burden for the consumer, who's two-thirds of the US economy, to sustain.

HORSLEY: OPEC ministers tried to rein in runaway prices this week by promising to boost their pumping quotas by half a million barrels a day, but the market largely ignored that gesture. With most OPEC countries already pumping as fast as they can, the cartel has little power to lower oil prices, although it could certainly raise them if members wanted to. Scott Horsley, NPR News.

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