NEWS AND COMMENTARY
October 19, 2000
Oil Prices Climb amid Continued Supply Concerns
A WSJ.com News Roundup
High Oil Prices Continue to Haunt Economy ... Weiss comments
NEW YORK -- Oil prices rose Thursday, continuing Wednesday's gains on bullish inventory data.
At about 10:15 a.m. at the New York Mercantile Exchange, November crude oil was up 42 cents, or 1.3%, to $33.90 a barrel after gaining 49 cents Wednesday. December crude gained 28 cents to trade at $32.75 a barrel.
November gasoline climbed 0.69 cent to 94.9 cents a gallon after surging more than two cents Wednesday. November heating oil edged up 0.26 cent to 96.85 cents a gallon.
Analysts said the market was still finding support from bullish inventory data from the American Petroleum Institute and the Department of Energy, which showed hefty draws in crude-oil and gasoline stocks, indicating that supplies remain extremely tight. Crude-oil stocks have been at or near 24-year lows since early August.
Traders also were keeping an eye on events in the Middle East, where fresh clashes broke out between Israelis and Palestinians Thursday, threatening to undermine a U.S.-brokered agreement and a self-imposed deadline to end the violence within 24 hours.
Energy Secretary Bill Richardson said that oil prices remain too high but he added that he doesn't anticipate a heating-oil crisis this winter. He said that the administration doesn't expect to further tap the nation's emergency oil reserve. Last month, President Clinton ordered that 30 million barrels of oil be tapped from the reserve in an effort to avert a heating oil crunch before the high-demand winter season.
Meanwhile, Federal Reserve Chairman Alan Greenspan said Thursday that the recent run-up in oil prices has had no effect so far on Americans' outlook on inflation, but he warned that high oil prices still have the capacity to disrupt the U.S. economy.
'Even though the intensity of oil consumption is markedly below where it was 30 years ago, it still has the potential to alter the forces governing economic growth in the United States,' Mr. Greenspan said in a speech at the Cato Institute. 'To date, the spillover from the surge in oil prices has been modest. Any effect on inflation expectations ... has been virtually nil.'
Mr. Greenspan said the Fed needs to be on the watch for 'oil-driven' risks to economic growth.
Oil and gas prices continue to soar even as Bill Richardson and Alan Greenspan downplay oil's impact on the economy. Richardson obviously didn't read the report from his department's statistical wing, the Energy Information Administration.
The EIA says that stocks of heating oil in the Northeast have fallen from 13.4 million barrels one year ago to 3.1 million barrels as of Friday. Somebody should remind the Energy Secretary that the Northeast was embroiled in a heating oil crisis last winter -- and their stocks in October were 77% higher than they are now. What's more, last winter was unusually warm. What if this winter is unusually cold? It's a recipe for disaster!
Even the extra 2 million barrels set aside as an emergency home heating oil reserve won't bring prices back down to affordable levels as prices are 56% higher than last year. No doubt they'll be moving much higher throughout the winter months.
It's not just the Northeast where energy-related inflation is damaging the economy, either. Last week's PPI report and yesterday's CPI report confirm that inflation in September rose beyond analysts' expectations. The first cold snap of the season could send oil prices through the roof -- and spark a winter of discontent across the entire country.