Oil futures start back down in early trading this morning with light sweet crude down 24 cents before the floor opens. Brent North Sea crude was down about 13 cents as well.
This start follows a dynamic market yesterday with prices dropping below $50 a barrel and then climbing back up above the $51 mark. Some gains in overnight trading have disappeared however as prices begin to sink again amid weak U.S. economic growth, near capacity production from OPEC and a growth in U.S. inventories.
Some speculated President Bush’s suggestions with regard his energy policy might help some but as the President admitted, none of his suggestions would fix the short-term problem of prices at the pump, now averaging over $2.20 a gallon in the U.S. This doesn’t bode well as the U.S. approaches its summer driving season beginning on Memorial Day weekend.
One of the biggest contributors in the U.S. remains oil refinery problems. With a number of U.S. oil refineries recently down for maintenance and a ConocoPhillips refinery in Louisiana down a second week; gas prices have felt the pain. All this combined with the fact the U.S. hasn’t built a new refinery since 1976 and the refineries now run a near capacity anyway.
Another issue has to do with an overall high demand. China and India have increased their consumption of crude by magnitudes in recent years. With the booming economic growth of these two highly populated countries, oil demand will only continue to climb.
Russia may have answers being the second largest petroleum producing country behind Saudi Arabia but most of their oil is in Siberia. Some experts feel their reserves are a lot higher than thought when the land was first surveyed but Russian has yet to really pursue heavily their Siberian supplies.
Rising oil prices, rising inflation, lower salaries, and lots of outsourcing doesn’t appear to bode well for the floundering U.S. economy.
John Stith is a staff writer for murdok covering technology and business.
