The price of oil climbed to nearly $61 a barrel yesterday, setting yet another record amid fears that producing countries cannot pump enough...
CHICAGO — The price of oil climbed to nearly $61 a barrel yesterday, setting yet another record amid fears that producing countries cannot pump enough crude to meet demand.
The rising cost of petroleum, up more than 60 percent in the last year, has focused new attention on China and its bid to secure long-term supplies. Using government money, a Chinese firm is trying to buy California-based Unocal.
Oil for August delivery rose 70 cents a barrel, to $60.54, on the New York Mercantile Exchange, after trading as high as $60.95. It’s the fifth time in the last seven trading sessions that the price of petroleum has hit a record settlement price.
Some economists believe the jump will translate into higher inflation. Petroleum’s biggest role in the economy is as fuel for transportation, though it is also a raw material for an almost endless number of products.
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“If you talk to someone who drives an SUV on a long commute each day, it’s going to hit their pocketbook,” said William Larkin, head of fixed-income investments at Salem, Mass.-based Cabot Money Management. “That is inflation.”
Oil costs are a much smaller portion of the economy than they were in the early 1980s, when there was also a dramatic rise in prices. That will moderate, but not eliminate, the impact of higher crude costs.
Prices are rising not because there is an oil shortage but because demand has risen faster than new production.
Much of that demand is coming from China, the world’s second-largest oil importer, where petroleum is needed to fuel a rapidly growing industrial sector.
Last week, China’s CNOOC offered to pay $18.5 billion for Unocal, which had already received a $16.6 billion bid from Chevron. Unocal has large petroleum reserves in south Asia and is a major retailer of gasoline in the United States.
“The recent offer for Unocal has implications not just for oil but probably for a whole range of necessary [natural] resources,” said Joe Noonan, chief investment officer at Boston-based Appleton Partners.
“The Chinese have been very global thinkers.”
Gasoline prices rise with oil prices, of course, and that has shown up at the retail level.
Ordinarily, rising prices hurt Ford and General Motors, which manufacture a large number of sport-utility vehicles and other vehicles that get poor mileage. The beneficiaries are companies like Honda, which builds fuel-efficient cars.
But gas prices haven’t risen high enough to greatly change the kinds of vehicles people want, said Art Spinella, president of consulting firm CNW Marketing Research in Bandon, Ore.
“For it to impact the auto industry in any sense, it has to be over $3 a gallon and stay there for a length of time,” Spinella said.
There could be some moderation in oil prices if the Organization of Petroleum Exporting Countries can expand production as promised.
Saudi Arabia has indicated it will increase its output to 11 million barrels a day, reportedly its maximum, from 9.5 million. But some analysts question whether the country actually has that much reserve capacity.
Nigeria, Africa’s largest oil exporter and a major supplier to the United States, also has promised to increase output.
But the country faces civil unrest and it is not certain it can pump more crude anytime soon.