WASHINGTON - Oil prices charged toward $50 a barrel Monday, and gasoline prices surged to $1.92 a gallon last week, as petroleum output in the Gulf of Mexico returns at a slower-than-expected rate after Hurricane Ivan and geopolitical unrest keeps traders on edge.
"The Ivan damage is persisting," said John Kilduff, senior oil analyst at Fimat USA in New York. Kilduff described $50-a-barrel as "just a mythical sort of number, like the 4-minute mile or 3,000 base hits."
The United States has lost more than 11 million barrels of oil production in the past two weeks, according to government data, with Gulf of Mexico output still down nearly 500,000 barrels a day. Analysts had initially thought the region's oil production would return to normal about a week after the hurricane.
The blow to domestic output, while expected to be short-lived, comes as analysts worry about OPEC's inability to swiftly and sharply increase production in the event of a more significant and prolonged supply disruption.
Light crude for November delivery settled 76 cents higher at $49.64 a barrel on the New York Mercantile Exchange - a new Nymex record - and reached $50 for the first time in after-hours trading.
The rising price of oil appears to be filtering down to the pump, where retail gasoline prices rose 5.1 cents nationwide to $1.917 per gallon last week, the Energy Department reported late Monday.
"When you've got uncomfortable inventory levels, it doesn't take a whole lot of news to push prices higher," said Tom Bentz, a trader at BNP Paribas Futures in New York.
In London, November Brent crude futures rose 60 cents to $45.93 on the International Petroleum Exchange.
Prices were strengthened Monday by reports of violence in oil-rich Nigeria, clashes in Saudi Arabia between government forces and suspected al-Qaida-linked militants and mortar attacks on the Iraqi Oil Ministry in Baghdad.
Also Monday, the Organization of Petroleum Exporting Countries admitted that its decision to boost its production target by 1 million barrels per day, beginning in November, has failed to calm the market.
Over the past two weeks the nation's supply of crude has fallen by 16.1 million barrels due to Ivan-related disruptions to oil production and shipping, according to the Energy Department. Oil inventories typically grow at this time of year as gasoline demand tapers off and refiners briefly shut down to perform maintenance.
When the government's weekly petroleum supply report comes out Wednesday, analysts expect to see sharp declines in the nation's inventory of oil for the third straight week.
The federal Minerals Management Service reported Monday that daily oil production in the Gulf of Mexico is 29 percent below normal at about 1.2 million barrels per day. Eleven million barrels of oil, or 1.9 percent of annual production in the Gulf of Mexico, have been lost since Sept. 13, when offshore producers began evacuating crews ahead of Ivan's arrival.
Today's higher prices are underpinned by an increasing sense of supply tightness in global oil markets.
With global oil demand roughly 82 million barrels a day, the amount of excess oil production available is only about 1 percent, according to many analysts, leaving the industry a slim margin for error in the event of a prolonged supply interruption.
The Energy Department said Friday it would lend 1.7 million barrels of oil to refiners whose operations have been strained by Ivan, though analysts expect these fuel loans to have a limited impact on prices.
The price of oil is up roughly 75 percent from a year ago, while gasoline is 33 cents per gallon more expensive than last year.
The high cost of jet fuel has devastated the already battered airline industry and as diesel prices continue to rise the trucking industry's profit margins are being squeezed.
"$2 per gallon diesel isn't as sexy to the public as $2 per gallon gasoline, but the added costs will certainly filter into every nook and cranny of the commercial economy," said Tom Kloza, director of the Lakewood, N.J.-based Oil Price Information Service.
Many economists believe that high energy prices are already damaging growth in the United States. For example, Wells Fargo's chief economist Sung Won Sohn recently said the nation's gross domestic product will rise only 3.5 percent on an annualized basis in the second half of the year. That's down from his earlier estimates of 4.5 percent.
Still, adjusting for inflation, today's prices are still more than $30 a barrel below the level reached in 1981 after the Iranian revolution. Economists also point out that the country is more energy efficient than it was two decades ago - due to conservation measures taken after prices skyrocketed and because the industrial sector has shrunk dramatically.
In other Nymex trading, October heating oil futures rose 1.01 cent to $1.3680 per gallon, while October gasoline futures fell 0.19 cent to $1.3463 per gallon.
Natural gas futures dipped 13.0 cents to $5.262 per 1,000 cubic feet.