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With crude oil prices moving higher, consumers are already fretting about how much it's going to cost them to fill their tanks. And given the current outlook, that cost is going to head even higher – meaning there's no relief in sight.
The political mayhem in Egypt is the latest oil price catalyst to appear, and is yet another candidate to help push 2011 oil prices closer to the predicted $150-a-barrel level. Analysts worry that Egypt's chaos could disrupt the millions of barrels of oil that pass through the Suez Canal.
Oil prices on the New York Mercantile Exchange (NYMEX) were steady yesterday (Tuesday), after jumping 8% in the previous two trading sessions to land just below $92 a barrel. Meanwhile, Brent crude oil futures in London hit a two-year high of $102.08 a barrel in intraday trading.
Traders' main unease is that the political unrest in Egypt will pop up in neighboring countries – especially those with a much bigger influence on the global oil market.
"I do believe we are going to see a spread of this popular uprising across the Middle East," Fadel Gheit, a senior energy analyst at Oppenheimer & Co Inc. (NYSE: OPY), told CNNMoney. "Traders are rightfully concerned."
Nearly a quarter of the world's supply of oil comes from Middle East nations. About 35% of that total, or 7 million barrels a day, comes from Saudi Arabia. In the past, severe interruptions due to civil unrest have prevented workers from getting to their jobs and maintaining expected daily shipments. Any distribution delay could put upward pressure on prices.
Some traders think the likelihood of the revolt spreading is slim, but others point out that few analysts anticipated the ongoing protests in Egypt.
"Two weeks ago everyone thought the [Egyptian President Hosni] Mubarak regime was one of the most stable in the world," said Oppenheimer's Gheit.
Egypt's political crisis is the latest driving force behind rising oil prices.
Continued economic recovery, supply constrictions and increased emerging market demand are expected to push 2011 oil prices well above $100 a barrel. Oil futures on the NYMEX rose 12% to average more than $85 a barrel during the October-December period, climbing past $90 a barrel in December.
The U.S. Department of Energy predicts gasoline prices will average $3.17 a gallon in 2011 and $3.29 a gallon in 2012. The estimates are based on 2011 oil prices of $93 a barrel and 2012 prices of $99 a barrel, which are lower than many analysts' predictions.
Gas prices on the U.S. west coast average 25 cents higher per gallon than the rest of the country, and peak driving season could see prices at the pump reach $4.00 a gallon.
This brings us to next week's Money Morning "Question of the Week": Are you concerned about rising oil prices in 2011? Has the Egypt political crisis exacerbated your oil price fears? Are you preparing for more price pressure at the pump in coming months? Are you taking advantage of investment opportunities in the energy industry?
Send your answers to firstname.lastname@example.org. We want to hear from you!
We reserve the right to edit responses for length, grammar and clarity.
Thanks to everyone who took the time to participate – via e-mail or by posting their comments directly on the Money Morning Web site.]
News and Related Story Links:
- Money Morning:
Egyptian Oil Operations Abandoned as Protests Disrupt Energy Industry
- Money Morning:
Oil Companies Pumping Profits as Crude Continues to Climb
Egypt oil threat may be overblown
U.S. Department of Energy Predicts Gasoline to Average $3.17 Per Gallon in 2011
- Money Morning News Archive:
Question of the Week Feature