With crude
oil prices at their highest
levels in two years and
showing no sign of abating
soon, consumers and businesses
are starting to feel the pinch
as the prices of gasoline,
heating oil, and diesel and
jet fuel begin to rise.
Industry
analysts and economists warn
that because of high oil
prices, Americans in the
coming weeks and perhaps
months are likely to be paying
more for nearly everything,
from fuel to roofing materials
to plastics. And the longer
prices remain high, the
greater the threat they pose
to the still-tepid economic
recovery, analysts and
economists say.
"This
would add another weight to
the recovery, but not derail
it," said Mark M. Zandi,
chief economist at Economy.com,
a consulting firm in West
Chester, Pa. "But it is
bad in the sense that we will
be struggling to maintain
growth."
The price of
crude oil has risen by almost
$7, or 27 percent, since early
November. In New York, crude
oil for February delivery rose
23 cents yesterday, to $32.72
a barrel, the highest since
November 2000.
Analysts
point out that there is a lag
of several weeks between an
increase in crude oil prices
and a commensurate rise in the
prices of petroleum products.
Just this week, however, the
average retail prices of
diesel fuel and gasoline rose
by 4 cents, or about 3
percent, according to data
collected by the Energy
Information Administration,
the analytical arm of the
Energy Department.
"When
crude goes up, it's just a
matter of time before it hits
you at the pump," said
Mary Rose Brown, a spokeswoman
for Valero
Energy, a large
independent refining company
based in San Antonio.
"Our retail guys are
saying that an increase of 5
to 10 cents is a reasonable
expectation."
That might
prove a conservative estimate,
some traders and analysts
said. The forces that are
pushing up prices seem, to oil
traders, to be worsening. A
general strike in Venezuela
against the government of
President Hugo Chávez has
halted nearly all oil
production and reduced exports
to a trickle.
Venezuela is
the fourth-largest exporter of
oil to the United States,
accounting for 14 percent of
crude oil imports. Although
government officials in
Venezuela have vowed to
restore production soon, oil
traders on the global markets
are skeptical, said Rick Smid,
an energy futures broker at
Fimat, a subsidiary of Société
Générale.
The
Venezuelan shortfalls have
buffeted the market as worries
rise again about a possible
war between the United States
and Iraq and its effect on oil
supplies from the Persian
Gulf.
For high oil
prices to have a great effect
on the economy, they have to
be sustained for more than a
month at $30 a barrel or more,
said David Costello, an energy
analyst at the Energy
Information Administration.
That prospect seems
increasingly likely,
especially as both sides in
the Venezuelan dispute
retrench.
It takes a
month or two for higher crude
oil prices to work their way
through the refining and
retail systems and to be felt
by consumers, Mr. Costello
said. That explains why price
increases on the retail level
are only being seen now, he
and other analysts said.
Conversely, if the Venezuelan
conflict were resolved now, it
would still take several weeks
for retail prices to fall,
they noted.
Industries
heavily reliant on oil are
already feeling the bite, Mr.
Zandi and others said. The
makers of textiles, paper,
chemicals and plastics will be
stuck with higher oil bills.
"It will affect airlines
and trucking
significantly," Mr. Zandi
said. "The airlines are
already hard pressed, and this
is one more thing to push them
under water."
In the last
month, the price of jet fuel
at New York Harbor has risen
nearly 15 percent, to 87.23
cents a gallon, according to
the Energy Information
Administration.
The region
that relies most heavily on
heating oil, the Northeast,
may also face sharply higher
prices, Mr. Zandi and others
said. Heating oil prices are
18 percent higher than they
were a year ago, according to
the Energy Information
Administration.
"New
York City will be hit very
hard," Mr. Zandi
predicted, "much more
than a place like Dallas or
Southern California."
The effects
of higher oil prices may
ripple through industries
that, at first glance, seem
remote from oil. Consider
roofing. The best asphalt for
roofing comes from
"heavy" crude oil
produced in Venezuela. With
those supplies gone,
"people are scrambling
already to find
supplies," Ms. Brown of Valero
said. "The cost of
roofing will go up."
If the
conflict in Venezuela were
resolved and striking workers
from the state oil company
returned to their jobs, that
would certainly bring more
crude oil into the market and
gradually deflate high prices.
But few people believe such an
outcome is likely anytime
soon.
Instead,
industry experts look to the
Organization of the Petroleum
Exporting Countries, of which
Venezuela is a member. Other
members said at a meeting
earlier this month that the
group would make up for
shortfalls of Venezuelan
exports if the strike
continued.
OPEC members
like Saudi Arabia and Kuwait
are among the few countries
that have the spare production
capacity to replace the
Venezuelan oil. But it remains
uncertain what steps OPEC has
taken so far. Moreover, it
takes about 40 days for oil to
be shipped from the Persian
Gulf to the United States,
which may mean that oil
supplies in the Western
Hemisphere may only be
replenished later in January.
"The
key thing now is how quickly
and on what scale the other
OPEC producers step up their
production," said Daniel
Yergin, the chairman of Cambridge
Energy Research
Associates, "and that
will determine in a week or 10
days where oil prices will be.
"You
could have replacement
supplies in late January from
the Persian Gulf. But all of
that assumes that nothing
happens anywhere else."