Brent Crude Oil Nears $110 on Mideast Turmoil

Brent crude traded at $107.68 today as West Texas crude prices moved to $94.24. The Brent benchmark could move higher than $110 if the turmoil in the Middle East continues.

Oil prices don't immediately transfer to gasoline pump prices, but they surely have an impact as crude moves through refineries into finished products. AAA data showed gas prices hit an average of $3.171 last week across the U.S. The price is between $3.255 and $3.735 in eight states, including California, Illinois, and New York. These states hold a quarter of the U.S. population. At what price levels do heating oil, gasoline and petrochemicals affect the U.S. economy and undermine GDP growth?

The risk is that growth could slip back below the 3% level that many economists have forecast for the year. Also, rising energy prices don't hit all sectors of the economy at once. Poorer and middle-class families are probably already feeling the pinch. Consumer spending was hit when gas rose to $4 a gallon in 2008, and some energy experts expect to see that price level once more.

Businesses that use petrochemicals and oil face similar problems. At companies where margins are already thin, high oil prices will cut profits and may even cause losses. That could trigger layoffs and eventually undermine any improvement in the jobless rate.

Two solutions to higher oil prices have been suggested. The first is lowering the federal tax on gas. It has been 18.4 cents a gallon since 1993. A lower tax rate, however, would obviously hurt attempts to trim the federal deficit and reduce pressure to keep moving the U.S. economy away from a dependence on imported oil. Another solution would be to release some of the Strategic Petroleum Reserve, which currently amounts to 727 million barrels. Although in this case, the government would risk having to replace the oil released at higher prices.

Increase your money and finance knowledge from home

Economics 101

Intro to economics. But fun.

View Course »

Banking Services 101

Understand your bank's services, and how to get the most from them

View Course »

Add a Comment

*0 / 3000 Character Maximum

22 Comments

Filter by:
ROBERT ARRIGHI

Let's drill now so we can lower prices on gas and food and we will not have to depend on the middle east for oil. What is wrong with Obama, he has money to live on but I try to make it on my social security check every month.

March 04 2011 at 7:12 PM Report abuse rate up rate down Reply
caohellsux1978

There is an email circulating around now to boycott the biggest of the big, Exxon/Mobil. If we could band together and do that, and get to their profits, it may cause them to lower prices. Then the others would follow suit. It would take a concentrated effort though from alot of people. I would say to start this as soon as possible, and take it through Memorial Day. That is the offiical opening of the summer driving season. Between now and then, DO NOT BUY EXXON/MOBIL PRODUCTS. LETS SEE IF WE CAN COME TOGETHER AND AMKE A DIFFERENCE.

March 02 2011 at 7:06 AM Report abuse rate up rate down Reply
rutch8

F THEM THE MIDDLE EAST. LETS USE OUR OWN GAS. OH THATS TOO EASY.EXCUSE ME

February 27 2011 at 5:17 AM Report abuse rate up rate down Reply
kazenoya1

Who are the real idots here? Us or the Government? When crude goes up in will not effect the rest of the refining, distribution and marketing except for when petroleum products are used in them, such a trucking and delivery by ship. So why do the federal and state government keep getting more tax money. This article says the tax remains the same. Yeah right. The Tax percentage may remain the same but 25% of $ 4.00 is alot more than 25% of $3.00. If the governemnt lowered the tax percentage so that they received the same dollar amount it wouldnt hurt them at all, they just wouldnt realize a windfall tax profit everytime speculators raise the price. As long as we focus on the illusion that its all the exporting countries fault we will never see the slight of hand by our own government and speculators.

February 26 2011 at 8:22 AM Report abuse rate up rate down Reply
craftect

I't not all the middle east guys, It's speculators on Wall Street that drive the price up.

February 26 2011 at 6:59 AM Report abuse rate up rate down Reply
capenv

In 2008 everyone blamed George Bush for $4.00/gal gas because he was an oil man.
Obama's not an oil man, now who do we blame? Here we go again. Everyone of us needs to drive less, use less oil and gas. If demand shrinks prices will fall. I'd love to see the hedge funds managers and commodity traders get screwed again. Every time some one farts in the middle east oil prices go up. There's plenty of oil in the world. No one is talking about shortages.

February 23 2011 at 1:15 AM Report abuse rate up rate down Reply
1 reply to capenv's comment
rutch8

GO AHEAD YOU STAY HOME.

February 27 2011 at 5:19 AM Report abuse rate up rate down Reply
imme534333

Each independent station operator sets his own price.Each one of these operators wants to make as large a profit as possible. Unfortunately for them and fortunately for us consumers we live in a relatively free market where if the station owner sets his price too high, we will simply take our business elsewhere. If he sets his price to low he will not be able to replace the product as it is quickly sold. The free market is an impersonal entity and those that incorrectly estimate what the market will bare are rapidly swept aside an replaced by those that do "get it" right. Big companies and small are subject to this rule. There is no escape in a free market and conspiracies simply don't work.

February 22 2011 at 12:09 PM Report abuse rate up rate down Reply
1 reply to imme534333's comment
kazenoya1

Someone needs to do a wee bit more research about price setting, gauging, speculation and fual taxes. Free market are what drive inflation up, ever heard of supply and demand? Fair profit is not the same thing as getting as much as you can no matter who it hurts.There is no impersonal free market, when commodaties are manipulated. Without co-conspiring howis it that all stations, all airlines etc, raise and lower prices at the same time? free market in theory should drive the prices down, until collusion and greed step in.

February 26 2011 at 8:28 AM Report abuse rate up rate down Reply
imme534333

This rhetoric is pure sensationalism by the "I'm a victim group". Ironically these same people fell silent when the gasoline prices fell in 2008 and 2009, if a rise in prices is a result of speculation and market manipulation then a fall must also be the result of the same forces.
The fact is that in today's relatively free an mostly unregulated retail gasoline market there is no conspiracy behind either the rise or the fall of prices at the pump.

February 22 2011 at 11:58 AM Report abuse rate up rate down Reply
imme534333

When oil prices start rising and gasoline prices at the pump quickly follow, journalist and conspiracy theorist cry foul, citing the fact that gas prices at the pump are being marked up immediately, even though the gas being sold at the station was bought previously at a lower price. Cries of price gouging and conspiracy get load and long. Politicians and pundits soon follow with claims that oil companies and station owners are profiteering at the expense of the American public.

February 22 2011 at 11:48 AM Report abuse rate up rate down Reply
watson83

Wake up people! This is once again the result of the speculators controlling our energy and commodity markets in general. Goldman Sachs of crap is and has been responsible for the CFTC having issued letters in the 90's allowing them and 15 other financial firms/investment banks to circumvent the end user rules of the 1936 Commodities act that was put in place and worked very well for several decades until these greedy, non-producing, money ******* destroyers of our country got into our oil futures market and are now using it as cash generator to fund their legalized gambling schemes on the backs of the people who actually do work and produce. We must let the powers that be know that this must change!

February 22 2011 at 10:41 AM Report abuse +2 rate up rate down Reply