(The Washington Times) - Talk of military strikes against Iran's nuclear facilities pushed oil prices to record levels in London yesterday while regular gasoline prices broke the $3 barrier at several Washington-area stations for the first time since October.
The price of premium crude settled near $69 a barrel in London and New York, barely $1 less than a record, while the price of wholesale gasoline rose to more than $2 a gallon and is now near levels that supported a record pump price of $3.07 nationwide after Hurricanes Katrina and Rita knocked out major Gulf Coast production facilities in August and September.
About 5 percent of U.S. refinancing capacity and 23 percent of Gulf Coast oil production remain shut down, and with pressure on international supplies intensifying from Iran to Nigeria and Venezuela, analysts say, the U.S. may meet or beat last year's records before the summer driving season is finished.
"There is an overwhelming amount of news on the bull side" pushing up prices, said William Adams, chief strategist at LaSalle Futures Group Inc. He said it would be "realistic" to expect another 50-cent increase in gas prices this summer.
The average pump price nationwide yesterday was $2.66 per gallon, up 12 cents in a week. The average price was 11 cents higher in the Washington area, where high pipeline transportation costs and substantial reliance on Gulf Coast supplies consistently keep prices several notches above the national average, according to GasBuddy.com.
Oil and gas prices in the past year have been pressured by growing demand in the United States and Asia while supplies are barely growing and are threatened in important producing countries. Internal unrest in Nigeria has forced the largest African supplier to cut production by 450,000 barrels a day, even as demand in the U.S. rises for light crude to make super-clean summer fuels.
The standoff between the United States and Iran over the Middle Eastern oil producer's nuclear ambitions has been the biggest antagonist for the oil markets this year.
"The geopolitical rally is back in full swing," said John Kilduff, vice president at Fimat USA. "These headlines have upped the ante," he said. "The Iranians could shut the Strait of Hormuz, if attacked, and are considerable oil producers."
He said reports that the U.S. is weighing air strikes and the use of tactical weapons to destroy Iran's nuclear facilities "sounds similar to the run-up to the invasion of Iraq" in March 2003. The conflict has prevented Iraq from attaining prewar levels of oil exports.
President Bush yesterday called the threats of military strikes "wild speculation," and an Iranian spokesman said the U.S. is engaging in "psychological warfare."
The Iranian nuclear dispute is keeping markets on edge. Iranian security officials have said they would use oil as a weapon even though the country's oil minister has said that no export embargo is planned, Cambridge Energy Research Associates reported. It expects oil prices to simmer because of strategic concerns, including the threat of new disruptions in Nigeria that would curb exports further before the nation's presidential elections a year from now.
In Venezuela, a primary U.S. supplier, President Hugo Chavez last week seized operations from France's Total and Italy's Eni SpA under a government plan to renationalize oil concessions. Exxon Mobil Corp. and Norway's Statoil have sold stakes in projects and are exiting Venezuela despite its vast oil resources.