Crude oil prices reach milestone

Crude oil prices soared to $100 a barrel Wednesday for the first time, reaching that milestone amid an unshakable view that global demand for oil and petroleum products will outstrip supplies.

But energy experts in Nevada and the West said the record price for crude would not necessarily translate into significantly higher prices at local pumps.

Peter Krueger, state executive of the Nevada Petroleum Marketers & Convenience Store Association, called Wednesday's high an anomaly. He added that crude oil prices would have to stay at or above $100 for an extended period for Nevada's motorists to suffer the results.

"I think this is just a blip, and unless these kinds of prices are sustained, we shouldn't have a problem," Krueger said. "At this point, we in Nevada, and the Nevada economy, are OK, unless ($100) becomes the norm."

Light, sweet crude for February delivery rose $4.02 to $100 a barrel in intra-day trading on the New York Mercantile Exchange, said Brenda Guzman, a Nymex spokeswoman, before slipping back to settle at a record close of $99.62, up $3.64.

Surging economies in China and India fed by oil and gasoline have sent prices soaring over the past year, while tensions in oil producing nations such as Nigeria and Iran have made investors nervous and have invited speculators to drive prices even higher.

Violence in Nigeria helped give crude the final push over $100. Bands of armed men invaded Port Harcourt, the center of Nigeria's oil industry Tuesday, attacked two police stations and raided the lobby of a major hotel.

Word that several Mexican oil export ports were closed because of rough weather added to the gains, as did a report that OPEC might not be able to meet its share of global oil demand by 2024.

Oil prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

Joe Sparano, president of the Western States Petroleum Association in Sacramento, Calif., said the federal Energy Information Administration's tracking of gasoline and crude prices over the past five years to six years show a strong correlation between petroleum and gasoline prices. That is because crude oil is a key component of fuel. In October, crude oil made up 68 percent of the cost of a gallon of gasoline, Sparano said.

But the connection between oil and fuel costs is not automatic.

Even as crude prices spiked from $55 a barrel in January 2007 to $77 a barrel in July, gasoline prices dropped. Motorists were paying 14 cents less for a gallon of regular unleaded gasoline in July than they were paying in June, an unusual reversal in the standard summertime trend that sees fuel prices jump as vacationers hit the road.

The summer's relief at the pump came from a glut in fuel, as refiners in countries such as the United Kingdom, Norway and Singapore flooded the United States with gasoline to capitalize on higher prices.

"Supply and demand were bigger factors than the price of crude," Sparano said.

Sparano said he does not see signs of similar supply gains in the current market.

Fuel inventories are about 2 percent higher now than they were a year ago, an increase that's "not excessive," he said.

The nation had 206 million barrels of gasoline on hand in the week that ended Dec. 21, Sparano said. That was roughly 2 million barrels less than inventories a week earlier, and it represents 22 days of stockpiles given the roughly 9.5 million barrels of fuel American consumers burn through daily.

"It's less than a month's supply," Sparano said. "At those levels, the people who trade commodities don't feel a great deal of comfort like they did earlier this year, when supplies for gasoline and diesel were higher."

Local motorists can watch several factors to determine whether fuel prices will rise in coming weeks and months.

First, civil strife in the Middle East and Africa will affect what commodities traders are willing to pay for crude. Intensifying unrest could cause traders to bid up crude prices if they think political tensions in oil-rich nations could constrict future supplies. And sustained high oil prices could work their way into gasoline costs.

Second, Nevada gets nearly all of its fuel from oil refineries in California, and any hiccups in the Golden State's refining sector could affect gasoline prices here, Sparano said.

The California Energy Commission follows weekly production on its Web site; its latest numbers show that gasoline output in the Golden State was 7.4 million barrels in the week ending Dec. 21, down 12.3 percent from 8.4 million barrels in the same week in 2006.

Finally, demand trends could lend insight into the future of fuel prices. Increases in fuel use could yield higher costs in coming months.

Through October, the latest month for which the Western States Petroleum Association has numbers, demand was 0.8 percent higher than it was a year earlier.

"Demand continues to tick along," Sparano said.

The Bush administration Wednesday said it would not release oil from the nation's strategic reserves to drive prices lower.

"This president would not use the (Strategic Petroleum Reserve) to manipulate (prices) unless there was a true emergency," White House press secretary Dana Perino said.

As of early November, the Strategic Petroleum Reserve contained 694 million barrels of oil. The government is working to fill it to its 727 million barrel capacity.

Crude prices, which have flirted with $100 for months, have risen in recent days on supply concerns exacerbated by Turkish attacks on Kurdish rebels in northern Iraq and falling domestic inventories. But post-holiday trading volumes were about 50 percent of normal Wednesday, meaning the price move probably was exaggerated by speculative buying.

"I would imagine the speculators are the biggest drivers today," said Phil Flynn, an analyst at Alaron Trading Corp., in Chicago.

Separately, the Organization of Petroleum Exporting Countries said its member nations might not be able to meet demand as early as 2024, though OPEC also said that deadline could slide for decades if members increase production more quickly. Word that several Mexican oil export ports were closed because of rough weather added to the gains.

Also, investors are anticipating that crude inventories fell by 1.7 million barrels last week, which would be the seventh straight weekly drop.

"(A decline) is not anything unusual for this time of year, but when it happens for seven weeks in a row, it starts to add up," said Amanda Kurzendoerfer, an analyst at Summit Energy Services in Louisville, Ky.

At the pump, gasoline prices rose 0.6 cent Wednesday to a national average of $3.049 a gallon, according to AAA and the Oil Price Information Service.

The Associated Press contributed to this report.