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Oil Prices Send Stocks Down, OPEC Production Cuts Hurt US Economy

If gasoline prices top $2 a gallon this summer, as some analysts predict they may, it could dent consumer confidence and become a point of contention in the presidential campaign. "If prices continue to rise significantly, it will become much more of a hot button issue," said Ken McCarthy, chief economist for vFinance Investments in New York. "Paying over $2 for regular will get a lot of people's attention."

Terrorism fears and political unrest in Venezuela, the world's No. 5 oil exporter [who would back more OPEC production cuts if needed to prevent a fall in world oil prices  http://www.mercurynews.com/mld/mercurynews/news/breaking_news/8227944.htm], have further rattled investors, and the prospect of continued rising demand from China has contributed to price gains.

OPEC, which supplies about a third of the world's oil, had long kept prices in a range of $25 to $30 per barrel high enough to maintain revenues, but low enough not to encourage conservation efforts or the development of alternative energy sources. But when the dollar started to weaken last summer, the group raised its price band to $30 to $35. With April oil futures topping $38 per barrel, many analysts say the stage is set for prices to surge past $40.
Sunday, March 21, 2004

Oil prices sends stocks down

By Meg Richards / Associated Press

NEW YORK You can add oil prices to the growing mountain of negatives that has sent the stock market tumbling over the past few weeks.

With crude oil futures trading at levels not seen since the run-up to the first Gulf War in October 1990, rising energy prices ultimately could weaken the solid corporate earnings that have been investors' sole consolation amid the market's recent volatility. If gasoline prices top $2 a gallon this summer, as some analysts predict they may, it could dent consumer confidence and become a point of contention in the presidential campaign.

"If prices continue to rise significantly, it will become much more of a hot button issue," said Ken McCarthy, chief economist for vFinance Investments in New York. "Paying over $2 for regular will get a lot of people's attention."

U.S. demand for energy has risen steadily as the economy has improved, but supplies of crude oil are tight, and likely to get even tighter if the Organization of Petroleum Exporting Countries goes ahead with planned production cuts next month. Terrorism fears and political unrest in Venezuela, the world's No. 5 oil exporter, have further rattled investors, and the prospect of continued rising demand from China has contributed to price gains.

Corporate bottom lines aren't in imminent danger shippers and airlines typically pass energy price hikes on to consumers in the form of fuel surcharges but in an already-nervous market, investors are quick to worry about worst-case scenarios. And as the benefits of tax refunds and mortgage refinancings start to wane, higher fuel prices are sure to gain significance among consumers.

"You're not going to see companies taking down guidance because of rising oil prices," said Jeff Kleintop, chief investment strategist for PNC Financial Services Group in Philadelphia. "But if job growth doesn't pick up and fuel prices stay this high, that could call into question the overall pace of economic growth, which certainly would have an effect on businesses."

OPEC, which supplies about a third of the world's oil, had long kept prices in a range of $25 to $30 per barrel high enough to maintain revenues, but low enough not to encourage conservation efforts or the development of alternative energy sources. But when the dollar started to weaken last summer, the group raised its price band to $30 to $35. With April oil futures topping $38 per barrel, many analysts say the stage is set for prices to surge past $40.
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SEE ALSO:

OPEC production cut strategy hurts US economy
 http://www.channelnewsasia.com/stories/afp_world_business/view/76432/1/.html

OPEC's aggressive six month old strategy of cutting oil production, which has seen prices come near a 13-year high, is hurting the United States which faces an increasingly difficult negotiating position.

The main oil exporting group made surprise production cuts in September and February at a time when supplies in the United States and other developing countries have been drained by demand from China, a tough winter in North America and high consumption of fuel for cars.
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Venezuela backs more OPEC production cuts if needed to prevent fall in world oil prices  http://www.mercurynews.com/mld/mercurynews/news/breaking_news/8227944.htm

"If it's necessary for Venezuela to back another cut in production, we will do it," Rafael Ramirez told reporters during an energy forum in Caracas.

homepage: homepage: http://www.detnews.com/2004/business/0403/21/c06-97868.htm

get really really used to it. 21.Mar.2004 10:24

this thing here

well, in about twenty years, or maybe forty years, or perhaps ten years, when oil prices will have risen to between $5 and $10 a gallon, it won't because the "greedy and selfish" arabs and venezuelans are cutting back on an abundant, limitless supply, it will simply be because there is no such thing anymore as an abundant, limitless supply.

and just wait till the chinese start buying cars...

there ain't enough to go around folks. humanity couldn't drill enough. so get used to prices going one direction for the rest of our lives...