- Title: USA: Oil prices surge to $100 a barrel as violence worsens in OPEC member, Libya
- Date: 24th February 2011
- Summary: NEW YORK, NEW YORK, UNITED STATES (FILE - DECEMBER 2010) (REUTERS) VARIOUS OF PEOPLE AT GAS STATION
- Embargoed: 11th March 2011 12:00
- Location: Usa, Usa
- Country: USA
- Topics: International Relations,Economic News
- Reuters ID: LVAE2U387J6Y5NP99A5S6I1RLAG2
- Story Text: Oil surged to a 28-month high of $100 U.S. dollars a barrel on Wednesday (February 23) as escalating violence in OPEC member Libya slashed output there and investors bet the unrest could spread to other oil exporters.
Brent has posted the biggest three-day gain since October 2009, rising to as much as $111.85 a barrel. That marked its highest since October 2008, shortly after the collapse of U.S. investment bank Lehman Brothers.
U.S. crude has shot up more than 15 percent since Friday (February 18).
West Texas Intermediate futures rose 3.7 percent to $99 a barrel as of 1:37 p.m. EST in New York, paring some earlier gains. Brent gave up some of its earlier advance to trade up 5.1 percent at $111.18.
A lethal political standoff between Libyan strongman Muammar Gaddafi and rebel factions now in control of oil-rich eastern Libya has already cut output in the world's No. 12 crude exporter by more than 25 percent, or 400,000 barrels a day, according to Reuters calculations.
The possibility that protests could expand in Bahrain or potentially into neighboring Saudi Arabia OPEC's top oil exporter, helped push prices higher.
While the kingdom has faced no tumult to date, hundreds of people on Wednesday backed a Facebook page campaigning for a "day of rage" across Saudi Arabia next month.
Nigel Gault, the Chief U.S. economist from IHS Global Insight, explained how the rise in oil prices directly affects the price of gasoline in the United States.
"Roughly speaking as a rule of thumb, every ten dollars on the oil price boost gasoline prices by about 25 cents, pushes up consumer prices by about four-tenths of a percent total and we think takes about a couple tenths off growth in the economy. So since the beginning of the year, we've had something like 10 to 15 dollars added to oil depending on which index you are looking at. So we are getting to the point now where we're starting to see some significant impacts on prices and there will be some restraint on the recovery. Whether it really puts a serious brake on the recovery, that depends on whether it stops here or whether prices keep climbing further," he said.
The price surge has raised concern about the impact of costly fuel on a fragile U.S. economic recovery.
"The big hit is to consumer spending. If consumers are paying higher prices at the gasoline pump, then that leaves them with less income available to spend on everything else," explained Gault. But Gault added, although consumer prices may rise, the demand for them may fall.
"It's a shock to real incomes. That matters for the U.S. economy, and in that sense, in parts of the U.S. economy it actually works as a deflationary shock, rather than an inflationary one because it reduces the level of demand," he said.
A jump in oil to a record $147 a barrel during 2008 led to demand destruction and contributed to the deepest global economic downturn since World War Two.
Meantime, the White House spokesman said on Wednesday, the United States is monitoring oil prices.
"We are obviously monitoring this very carefully and we are concerned about it," White House spokesman Jay Carney told a daily media briefing.
He said he would not speculate on where oil prices might go.
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