January 2, 2008
Oil Hits $100 a Barrel for the First Time
By JAD MOUAWAD
Oil prices reached the symbolic level of $100 a barrel for the first
time on Wednesday, a long-awaited milestone in an era of rapidly
escalating energy demand.
Crude oil futures for February delivery hit $100 on the New York
Mercantile Exchange shortly after noon New York time, before falling
back slightly. Oil prices, which had fallen to a low of $50 a barrel
at the beginning of 2007, have quadrupled since 2003.
Futures settled at $99.62, up $3.64 on the day.
The rise in oil prices in recent years has been driven by an
unprecedented surge in demand from the United States, China and other
Asian and Middle Eastern countries. Booming economies have led to more
consumption of oil-derived products like gasoline, jet fuel and
diesel. Meanwhile, new oil supplies have struggled to catch up.
Oil markets have become increasingly volatile and unpredictable, with
large swings in 2007 that analysts attributed partly to financial
speculation, not just market fundamentals. Political tensions in the
Middle East, where more than two-thirds of the world's proven oil
reserves are located, have also fueled the rise in prices.
Gasoline has lagged the rise in the price of oil. It stands at a
nationwide average of $3.05 a gallon for regular grade, according to
AAA, the automobile club. That is below the all-time peak in May of
$3.23 a gallon, but it is 73 cents higher than at this time a year
ago. Some analysts worry that gasoline could hit $4 a gallon by next
spring if oil prices remain at high levels.
Oil is now within reach of its historic inflation-adjusted high
reached in April 1980 in the aftermath of the Iranian revolution when
oil prices jumped to the equivalent of $102.81 a barrel in today's
money.
Unlike the oil shocks of the 1970s and 1980s, which were caused by
sudden interruptions in oil supplies from the Middle East, the latest
surge is fundamentally different. Prices have risen steadily over
several years because of a rise in demand for oil and gasoline in both
developed and developing countries.
