Oil Jumps Above $72 to New High
Oil prices jumped above $72 a barrel to yet another record Wednesday after a government report said supplies of crude made a surprise decline and gasoline stocks fell far more than expected
The Energy Department said in its weekly inventory report that supplies of gasoline fell 5.4 million barrels last week. Analysts had predicted a decline of 2.5 million barrels, according to Reuters.
Oil has been hitting record highs in recent sessions, unadjusted for inflation, on supply worries fed by fears of a confrontation with Iran, the world's fourth-biggest producer. But it's also within sight of inflation-adjusted highs of around $80 a barrel set in the late 1970s and early 1980s following the gas crisis and the Iranian revolution.
Gasoline supplies have been watched especially closely the last few weeks as the U.S. gears up for summer driving season.
In addition to soaring crude, growing demand and problems at refineries - including lingering effects from last season's hurricanes and a switch to less polluting gasoline - have contributed to rising prices at the pump.
Gas prices closely follow crude prices, which have jumped about 13 percent this year, mainly on political uncertainty or violence in Iran, Nigeria, Venezuela and Russia - all major producers. Oil prices soared 45 percent in 2005.
The International Monetary Fund said high oil prices could begin hurting world economic growth and called on the U.S., which uses a quarter of total world production, to raise taxes in a bid to reduce demand, Reuters reported.
Reuters also said OPEC ministers will meet next week informally to discuss prices, but said there is little the cartel, already pumping at near full capacity, can do to ease the situation.
But politics is only part of the story with crude prices. Oil has been on a charge for the last few years, more than tripling in price since the start of 2002.
And fundamental supply and demand has also played a big part as discoveries of new, easily recoverable supplies have failed to keep pace with ever rising demand from the U.S. and developing countries like China and India.