Taking Cues From Fed, Speculators Bid Up Oil

Federal Reserve Chairman Ben S. Bernanke may have cooled off the credit crisis by cutting interest rates, but he may also have heated up oil prices this week.

For seven consecutive business days, crude oil prices have hit new highs. Even after dropping slightly yesterday, crude oil on the New York Mercantile Exchange finished the week at $81.62 a barrel, up a third since Jan. 1 and not far short of the inflation-adjusted peak set in January 1981, when Saddam Hussein’s Iraq was at war with Iran.


Though gasoline prices haven’t matched earlier levels, new price increases could come soon. AAA said that the nationwide average price of regular unleaded gasoline was holding steady at $2.80 a gallon, up 34 cents from a year ago but still 43 cents below its peak, on May 24.

The fuel for the latest surge in petroleum prices has been renewed speculation by investors and hedge funds after the Federal Reserve’s cut in interest rates eased concerns about an economic slowdown. For every percentage-point increase in gross domestic product, oil consumption in the United States, the world’s biggest oil market, grows from a quarter to a third of a percent.

Washington Post