honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Wednesday, August 1, 2007

Oil-price record set at $78.21 a barrel

By Barbara Hagenbaugh
USA Today

WASHINGTON — Oil prices broke a year-old record yesterday as the tight balance between supply and demand kept investors on edge. But the gains are not expected to spill over into prices at the pump.

The price of a barrel of light, sweet crude oil trading for delivery in September rose $1.38 to $78.21. That broke the previous record, not adjusted for inflation, of $77.03 set a little more than a year ago. In inflation-adjusted dollars, the record was set in January 1981, when oil topped $92 a barrel.

The price increase comes as refineries are expanding gasoline supplies after reducing production for maintenance earlier this year. That has led to a jump in demand for oil to produce gasoline.

Healthy worldwide economic growth is also boosting prices. Plus, some large oil companies, such as BP and ConocoPhillips, are reporting production declines from a year ago. Add in fears of disruptive hurricanes, and you have higher prices.

More expensive oil is not expected to lead to higher retail gasoline prices. With refineries increasing production, there should be sufficient gasoline supplies to keep a lid on prices at the pump.

Yesterday, the nationwide average price of a gallon of regular gasoline was $2.876, down more than a penny from the prior day and nine cents lower than a month ago, according to motor club AAA. Lindemer says he anticipates prices in the $2.75 to $2.80 range by Labor Day. The average price for a gallon of regular in Hawai'i was $3.277 yesterday, down 3 cents from the prior day and 11 cents lower than a month ago.

Still, economists are keeping an eye on rising energy costs, which sometimes have preceded downturns in the U.S. economy. "Economists are a bit nervous," Federal Reserve Bank of St. Louis President William Poole said in a speech last week.