Oil prices hit multi-year highs amid Libya unrest
NEW YORK — Oil sold in New York crossed the symbolic $100 a barrel level Wednesday, hitting prices not seen since 2008, amid fears over supplies from Libya.
As traders panicked that political chaos could spread further in the Middle East, the main US contract reached $100 a barrel for the first time since October 2008.
London’s main Brent contract — which is more sensitive to Middle East unrest thanks to Europe’s greater dependence on oil from the region — surged past $110 a barrel.
With foreign oil workers fleeing Libya and rumors swirling that Moamer Kadhafi may sabotage pipelines, analysts raised the prospect of a bonafide oil crisis.
“If Libya and Algeria were to halt oil production together, prices could peak above US$220,” Michael Lo of Nomura told clients in a note.
He warned that the oil cartel OPEC could see its production capacity cut to 2.1 million barrels a day, levels seen during the 1990-91 Gulf War, when prices rose to $147 a barrel.
With US prices up by around $10 in the last two days, consumers can expect to see higher prices at the pump soon.
The recent increases could translate into a 25 cent increase in gasoline prices at the pump, based on averages produced by Moody’s.
With much of the global economy still ailing from the financial crisis, many fear such sharply higher oil prices could smother the recovery and send many nations spiraling back into recession.
“A one-penny increase in the price of a gallon of gasoline acts as a sales tax on consumers at the rate of 1.2 billion dollars a year,” said David Kotok of Cumberland Advisors, quoting research from Naroff Economic Advisors.
“This is nowhere near over. We are watching a ‘sea change’ occur among one tenth of the world?s population,” he said warning the turmoil could cause a double-dip recession in the United States.