With a widening gap between growing demand and stagnant or declining supply, and speculators poised to take advantage of the inevitably increasing value of an ever scarcer essential commodity that no one is prepared to do without, any number of small events can become the tipping point when it comes to the price of oil. Given the close relationship between oil and our economy (and food system), what appears to be a minor event or inconsequential comment can have vast repercussions.
Bloomberg.com: Oil Surges Above $140 to Record as Libya Warns of Output Cut
Whatever role the Enron Loophole has to play in this, it may be too late to close it before that loophole turns into a noose.
Crude oil jumped above $140 a barrel to a record as Libya threatened to cut output, OPEC’s president said prices may reach $170 by the summer and the dollar weakened.
Libya may curb output because of a U.S. law that allows terror victims to seize assets of foreign governments as compensation. OPEC President Chakib Khelil said oil may surge on a European interest rate rise, France 24 reported. Oil, gold and copper climbed today as the dollar dropped because the Federal Reserve gave no signal of higher interest rates yesterday.
“The Libyan comments are helping send us higher,” said Brad Samples, commodity analyst for Summit Energy Inc. in Louisville, Kentucky. “The Libyans are responsible for only about 2 percent of production, but with supplies tight every missing barrel will have an impact.”
Crude oil for August delivery rose $4.98, or 3.7 percent, to $139.53 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices touched $140.39 today, surpassing the previous record of $139.89 reached on June 16.
“These days there are so many people with fingers poised on the trigger that moves are exaggerated,” said Jim Ritterbusch, president of Galena, Illinois-based energy consulting firm Ritterbusch & Associates.
A couple of other little things that can turn into tipping points:
- U.S. legislation allowing lawsuits against the Organization of Petroleum Exporting Countries (NOPEC) may lead to retaliation by OPEC
- A political crisis that would stop Iran’s oil production