The price of oil rose to $141 US a barrel on Asian trading , the reason for rise is once again the U.S. dollar but a comment by OPEC's president shares the blame.
It is beginning to feel like old news, the increase in the price of oil, that is, but in our oil dependent world each new price hike has an effect that ripples through the economy.
In Asian trading, the price of oil
reached a new height when it rose $141 US as the American dollar's protracted slump prompted investors to flock to oil as a hedge against inflation.
A remark by OPEC's president, Chakib Khelil, last Thursday may also have fueled the rise. Kehil predicted that crude prices could rise well above $150 a barrel this year and Libya said it may cut oil production.
The cots of light, sweet crude for August delivery rose as high as $141.71 a barrel before pulling back to $141.10, up $1.46 in Asian electronic trading on the New York Mercantile Exchange, midafternoon in Singapore.
The day before, Thursday, the U.S. dollar had slipped against key currencies as U.S. data showed sluggish economic growth and pointed to a struggling labour market. Oil is priced in dollars, and some investors buy oil contracts to protect the value of their assets against accelerating inflation when the dollar falls.
"The dollar movements caused the surge in oil pricing and the bullish trend remains intact," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "The oil market is subject to further spikes in the coming weeks."
Then, on Friday, the dollar slipped to 106.42 yen from Thursday's 106.91 yen.
Khelil is not the only one to make dire predictions when it comes to oil. For example, Goldman Sachs' stated that prices could rise as high as $200.
Matters are becoming even more worrisome as the head of Libya's national oil company said the country may cut crude production because the oil market is well supplied, according to news reports.
Analysts are not taking the Libyan comments seriously claiming that the current level of oil prices provides an incentive for producers not to cut output.
"I doubt that any real effort in cutting output would be forthcoming, considering that pricing continues to hit new records," Shum said. "There's no economic reason to cut output at this time so it's just talk."
As the price of oil and all that is connected to it continue to rise and for the most part wages remain static, what is being done to avert the coming economic and social disasters?
