Crude oil surpassed $50 a barrel for the first time and analysts said Tuesday that prices could keep rising because of a sharp rise in global demand, tight supplies and threats to output in petroleum-producing nations such as Iraq and Nigeria.
Homeowners and energyintensive industries could feel the sting from high oil prices worsen as seasonal demand picks up this winter, and there is already evidence that the supply disruptions caused by Hurricane Ivan are making it more costly to drive.
The 75 percent increase in the price of oil in the past year also promises to heat up as a political issue, with just over a month until the presidential election.
Crude futures first hit $50 a barrel in after-hours trading late Monday, spurred higher by reports that rebels in Nigeria continue to battle for control of the vast southern oil fields in the world’s seventhlargest exporter.
A unit of Royal Dutch/Shell Group, which accounts for roughly half of Nigeria’s daily production of 2.5 million barrels, said Tuesday that insecurity in the region forced it to shut an oil flow station in the Niger Delta that pumps 28,000 barrels a day. Also on Tuesday, Saudi Arabia pledged to boost the limits of its daily oil production by a half-million barrels, bringing its output capacity to 11 million barrels, but the move failed to calm markets since it does not mean actual supplies would be added anytime soon.
Light crude for November delivery rose 26 cents to $49.90 to a new settlement high on the New York Mercantile Exchange after trading as high as $50.20 earlier in the day.
Adjusting for inflation, today’s prices are still about $30 a barrel below the level reached in 1981 after the Iranian revolution.
Why oil prices are up: Mideast instability. Hurricane damage to U.S. production. Unrest in Nigeria, Africa’s top oil exporter.
The pain: Higher prices to heat homes, whether by oil or gas. Costlier gasoline and airline tickets, unless competition limits rises. Declining stock prices, except for energy companies
What’s being done: OPEC is pumping more. Saudi Arabia will boost production capacity. The United States will use the Strategic Petroleum Reserve to offset hurricane disruptions.
Price check: Adjusting for inflation, $50 oil is more than $30 below prices in 1981.