Oil prices spike again

09-Sep-05

A statement by the U.S. Department of Energy that energy costs in the United States for the upcoming winter would be the highest in 10 years, has pushed crude oil prices above US$65 a barrel. October crude oil contracts on the New York Mercantile Exchange rose to US$65.01 a barrel. Nymex crude is nearly US$6 off its all-time peak of US$70.85 a barrel that it hit on Aug. 30, but is still almost 50% higher than a year ago. The Energy Information Administration, a division of the Energy Department, revised figures for winter following Katrina and said: o Petroleum will cost 34% more from a year ago. o Natural gas will be 52% more expensive. o Electricity will likely cost Americans 11% more than in 2004. In all, for all of 2005, energy expenditures in the United States are expected to be US$1.08 trillion - 24% above the 2004 level, approximately 8.7% of annual GDP, compared to 6.2% in 2002. More damage reports from Hurricane Katrina continue to come in, as at least 4 refineries in the U.S. Gulf Coast shut down by the storm are reported to remain offline for months: Chevron Corp's Pascagoula, Exxon Mobil-PdVSA's Chalmette, ConocoPhillips's Alliance and Murphy Oil Corp's Meraux. Unfortunately, the hurricane season is not yet over and the severity and location of hurricanes over the next few months could continue to influence U.S. and world oil markets. Winter is traditionally a peak season for distillates, which group heating oil, jet fuel and diesel. High demand is a concern for markets as there is limited excess capacity to deal with an unplanned production outage.