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Could climbing oil prices destroy economical recovery? March 5, 2011

Posted by mytruthaboutoil in Geostrategy, Oil (general), Oil prices.
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Libya today. Tomorrow the whole arabic peninsula? Oil trading analysts are scared of what could become a major problem for a recvoering world economy. With $200 a barrel, ain’t we doomed for a new recession?

Oil has been trading at more than $100 a barrel in the U.S. the past couple of days, largely because of fighting in Libya. That has gasoline prices up, too.

The Energy Information Administration says last week the average price for regular gasoline across the country jumped nearly 19.4 cents to $3.34 a gallon. That was the steepest one-week rise since Hurricane Katrina disrupted oil production in the Gulf of Mexico in 2005.

Now there are concerns higher gas prices could stall a recovering economy. You can count Joe Occhipinti of Portland, Ore., among the concerned.

“I’m getting $20 worth of gas,” Occhipinti said, standing near his white work van at an Arco station. “I can’t afford to fill it up.”

Occhipinti, a cabinetmaker, estimates he’s spending about $100 a week on gasoline. That makes it difficult to keep his costs down and his jobs profitable.

“Lumber — all that other stuff — I can factor in, but this thing happens with Libya and now all of the sudden gas prices are raised up, but I made my bid three months ago,” he said.

Occhipinti also is relearning a lesson from 2008 when gas sold for $4 a gallon: Spending more on gas means you have less to spend elsewhere.

“One of the things that I miss a lot [is] taking my wife out to dinner,” he said.

Instability in the Middle East is largely blamed for the most recent jump in oil prices. But government data show a steady increase since September. That’s because demand for oil has been going up in the U.S. after declines during the recession. Then the fighting in Libya prompted traders to worry about supply.

“If you were to remove some of that oil supply, we’d be in a situation where demand could exceed supply, and that’s just a scary moment in economics,” says Patrick DeHaan, senior petroleum analyst at GasBuddy.com.

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