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Crude Oil Prices Hit Record Highs

posted on April 21, 2006


Hello, I'm Mark Pearson. The U.S. economy grew rapidly in the first quarter of 2006, but government reports this week suggest the expansion is slowing. *According to the Commerce Department, construction of new homes dropped by 7.8 percent in March, marking the fourth decline in the past six months. *Meanwhile, the Consumer Price Index rose four-tenths of one percent last month, up steeply from February. The hike reflects higher costs for everything from gasoline to clothes and lodging. *Core inflation, which does not include energy and food, rose by three tenths of one percent in March, its fastest pace in the past year. You needn't look any further than the nearest gas pump to know that prices are soaring. Crude oil prices set record highs this week, exceeding $75 per barrel on Friday. And the high cost of crude is driving up prices at the pump.
Crude Oil Prices Hit Record Highs Demand for gasoline typically peaks in the summer. This year though, the Department of Energy is predicting supplies could be tight. Much of the government's concern is due to tight supplies of ethanol, which is needed in increasing amounts as refiners phase out rival oxygenate MTBE.

At a recent hearing on summer fuel prices, some U.S. Senators broached the question of easing tariffs on ethanol imports to help fill the potential gaps in domestic supplies. Imported ethanol currently is subject to two duties in the U.S. -- a 2.3 percent ad valorem tax and a secondary tariff of 54 cents per gallon. However, such legislative proposals are believed to face problems moving forward this election year due to the shorter calendar.

Agriculture and ethanol industry leaders maintain their will be enough of the renewable fuel. With 97 plants in operation and more than 100 million gallons of ethanol expected to be imported, they contend, there will be no shortage.

Anne Steckel, American Farm Bureau Federation: "We are increasing ethanol production facilities immensely. 33 new refineries are coming into play with nine in expansion. The future is very bright for ethanol, and our firms are doing all the right things."

Worries about Iran continue to lift oil prices. Traders are anxious that U.S. efforts to stop that country's suspected nuclear weapons program could lead to a disruption in Persian Gulf oil supplies. China also is a factor in the rising prices. As the world's fastest expanding economy continues to grow, Beijing's hunger for oil is affecting its position on Iran, and was high on the agenda for President Hu Jintao's visit to the White House this week.

President Bush has warned China against trying to "lock up" global supplies. In the interest of keeping their investment healthy with Iran, the Chinese have refused to support sanctions against the Middle Eastern country for defying the Security Council over its enrichment of uranium. In 2004, China used some 6.5 million barrels of oil a day and surpassed Japan as the world's second largest user of petroleum products. The U.S. is the largest user, consuming about 20 million barrels a day.


Tags: China news oil