US once again at mercy of oil dependence, gas prices to skyrocket.
Oil prices surged Friday as thousands continued to riot against the government in Egypt, and unrest threatened to spread across the Middle East.
Benchmark oil rose $3.12, or 3.6 percent, to $88.76 a barrel in afternoon trading on the New York Mercantile Exchange. Prices shut up about $2 a barrel in less than half an hour at midday after the White House expressed its concern about the violence in Egypt.
Anxious traders pulled money from other assets to buy oil, gold and the dollar, which are considered safer risks during uncertain times.”This is definitely a flight into safety,” said Rich Ilczyszyn, a senior market strategist with futures brokers Lind-Waldock.
The uprising in Egypt follows protests this month that forced out the president of Tunisia, who fled to Saudi Arabia. Anti-government protests have also rocked Lebanon and Yemen.
“I think it’s just kind of the feeling that this could continue to spread, or just the whole nervousness about the region, not that there’s any specific cutoff of supplies or anything like that,” said Tom Bentz, an analyst at BNP Paribas Commodity Futures.
Bentz said a lot will depend on what happens over the next few days. “Are we going to see a regime change? Are we looking at cutoffs of supplies? I think it’s just one of those things you have to watch closely,” he said.
Oil prices started to rise earlier Friday after the Commerce Department said the economy got stronger at the end of last year as Americans spent at the fastest pace in four years and U.S. companies sold more overseas. In 2010 the economy grew 2.9 percent, the most since 2005.
Gas pump prices have been on hold this week as oil prices leveled off and then fell below $86 a barrel before Friday’s rise. The national average for regular gasoline is $3.10 a gallon, according to AAA, Wright Express and the Oil Price Information Service. That’s 1.7 cents less than a week ago but still 41 cents more than a year ago.
Americans already have started watching their budgets and adjusting their spending as gas prices stay above $3 a gallon. Analysts are concerned that lingering high prices will force consumers to take more steps to conserve, which would affect the economic recovery.
In other Nymex trading in March contracts, heating oil gained 4 cents at $2.6983 a gallon, gasoline added 7 cents at $2.4807 a gallon and natural gas fell picked up a penny $4.330 per 1,000 cubic feet.
In London, Brent crude added $2 at $99.39 a barrel on the ICE Futures exchange. Source