Oil surges to record at over $95 a barrel
NEW YORK (Reuters) - U.S. oil hit a record over $95 a barrel on Wednesday, posting the biggest gain in 10 months after a steep drop in U.S. inventories fueled winter supply concerns and the U.S. Federal Reserve cut interest rates.This might be a good time to return to that post three and a half years ago, Oil, Half Way To Empty. Even the pessimists three years ago thought we wouldn't see $100 a barrel oil until 2010. I guess they underestimated George W. Bush. When Bush took office oil was going for $25 a barrel. Let's do the math: 95 - 25 = 70. Yes that's over a 300% increase in less than 7 years, some legacy. So what happens now?
U.S. oil rose $4.90, more than 5 percent, to $95.28 a barrel in late electronic trading after settling at $94.53 earlier. London Brent settled up $3.19 at $90.63 a barrel.
U.S. crude oil stocks fell 3.9 million barrels in the week to October 26, government data showed, countering expectations for a build ahead of the Northern Hemisphere winter.
The draw was led by a huge tumble in stockpiles at the Cushing, Oklahoma, delivery point for the NYMEX oil contract as companies drained storage tanks.
"Given the economics of what it takes to store oil, it makes no sense to hold on to inventory right now," said Stephen Schork, president of The Schork Report. "Storage owners are taking the economically prudent step and dumping inventories."
Retail heating oil prices in top oil consumer the United States shot to a record $2.95 a gallon last week on the winter supply worries.
Further price support came as the dollar plummeted to a record low against the euro. The weak greenback has boosted many dollar-denominated commodities in recent weeks.
According to social critic James Howard Kunstler it will impact the very fabric of the world economy including agriculture, manufacturing and retail trade. As Kunstler describes it in the Naparstek paper:So the earth won't be nearly as flat as you thought Mr Friedman."The whole Archer Daniels Midland model of turning oil into corn into Taco Bell—that whole complex, that system, is really going to be over," says Kuntsler. "We're going to be forced to grow more of our food locally and return to a kind of agriculture that really hasn't been practiced here in a long time. A lot of the land that has only had value as suburban development in the past 30 or 40 years is going to have to be reassigned."
Likewise, Kunstler foresees "the demise of Wal-Mart style, big box, national chains." Companies whose profit margins depend on "merchandise made by factories 12,000 miles away" simply won't function in a world of $100-plus barrels of oil. "We're going to have to seriously reorganize our whole system of retail trade and economy."