Oil prices hit $90 milestone
NEW YORK - Oil prices on Tuesday jumped above $90 a barrel for the first time in more than two years, a key milestone for Wall Street analysts who say tightening supplies will eventually send
prices above the $100 mark next year.
The recent surge in oil pushed gasoline and other fuel prices higher as well. Average heating oil and diesel prices are expected to increase year-over-year for the first time since 2008, and the
Oil Price Information Service said gasoline prices may hit a national average of $3 per gallon before Christmas day.
The price increases probably won't be enough to affect holiday shopping, but U.S. consumers will eventually pull back on spending at the start of 2011, OPIS chief oil analyst Tom Kloza said.
"This sets up a very shaky January," Kloza said. "People are still going to drive to grandma's house. They're going to take it out on the economy later."
Overnight, the national average pump price added less than a penny to $2.958 a gallon, according to OPIS, auto club AAA and Wright Express. A gallon of unleaded is 11 cents higher than it was
a month ago and 32.6 cents higher than it was a year ago.
Kloza said gasoline could rise to between $3.25 and $3.50 a gallon by spring.
On Tuesday benchmark oil for January delivery gave up 78 cents to $88.60 a barrel on the New York Mercantile Exchange. The contract hit $90.76 a barrel earlier in the day, the highest price since Oct. 8, 2008.
Oil prices had been relatively stable for more than a year. They've moved higher since the Federal Reserve announced plans to inject $600 billion into the economy. Prices crossed the $90 mark
early Tuesday as President Obama and Republican leaders hammered out an agreement to extend Bush-era tax cuts. A cold snap also swept through Europe and the U.S., lifting demand for fuel.
Wall Street analysts now predict that oil will hit $100 per barrel sometime next year. They point to rising demand from China and other emerging economies. OPEC countries can crank up production to meet that demand now, but their ability to do that is expected to decline over the next few years.