Washington Post: Tensions over the fate of 15 British sailors and marines captured by Iran in the Persian Gulf last week helped drive crude oil prices to a six-month high yesterday, threatening to boost gasoline prices just two months before the start of the summer driving season.
Increase Threatens to Boost Gas Prices
By Steven Mufson
Washington Post Staff Writer
Friday, March 30, 2007; Page D01
Tensions over the fate of 15 British sailors and marines captured by Iran in the Persian Gulf last week helped drive crude oil prices to a six-month high yesterday, threatening to boost gasoline prices just two months before the start of the summer driving season.
Traders sent the price of crude oil up by 3 percent, to $66.03 a barrel in New York yesterday, after Iran put off a previously announced plan to release a British woman being held and Prime Minister Tony Blair said Britain would not negotiate.
The price of gasoline for April delivery in New York commodity markets jumped 7.83 cents, or 3.8 percent, to $2.1355 a gallon, the highest closing price since Aug. 11.
Oil traders worried that the conflict could disrupt Iran’s oil exports or shipments through the Strait of Hormuz, the narrow opening that leads from the wells of oil-rich Saudi Arabia, Kuwait, United Arab Emirates and Qatar to world markets. Iran is on one side of the strait.
Edward Morse, a managing director and chief energy economist of Lehman Brothers, said “speculative investments” were pushing up the price “because of the 17.5 million barrels a day of oil that goes through the Strait of Hormuz.”
At the same time, he cautioned that the run-up in prices since the standoff began last week was an overreaction and did not “reflect any rational, probabilistic assessment of what the chances of a disruption might be.” Over a two-week period, crude oil prices have climbed more than $9 a barrel.
A steady fall in world oil inventories had been nudging oil prices higher even before Iran’s seizure of the British sailors and marines. World oil inventories have dropped by about 70 million barrels over the past eight weeks, Morse said.
That’s bad news for U.S. drivers. Even before this week’s rise in oil prices, retail gasoline prices were 11.2 cents a gallon higher than they were a year earlier, the Energy Department’s Energy Information Administration said Wednesday.
Although high crude oil prices are traditionally the driving factor in rising gasoline prices, U.S. gasoline prices have been rising because U.S. refineries have been able to boost operating margins sharply this year.
The U.S. refiners have been helped by strong gasoline demand in the United States despite high prices and by refinery maintenance and unplanned outages that have lowered U.S. gasoline production, according to the Energy Information Administration.
Worldwide, refined petroleum product prices have been firm because Venezuela and Nigeria, both members of the Organization of the Petroleum Exporting Countries, have been importing gasoline because of problems in their refining industries.