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Oil Prices Hovered Around $55 A Barrel, Sending Up Gas Prices
Rising crude prices reflected immediately at gas pumps
By JOHN MCPHAUL
March 10, 2005
Crude oil prices briefly surpassed $55 a barrel last week, sending gasoline prices up at local pumps.
Analysts attributed the high prices to a number of factors including persistent cold weather in the north, a weak dollar, global growth in demand and tightness of supplies. Global oil demand, spurred by particularly high rates of economic growth in China and India, grew 3.3% in 2004, the biggest increase since 1976, according to the Guardian newspaper. Another factor is large institutional investors that have been speculating in the oil futures market.
Gasoline prices followed suit with the Gulf Coast waterborne spot price, the benchmark used by local gasoline retailers, shooting up 11.78 cents last Wednesday, according to Juan Rodríguez, an analyst at the Department of Consumer Affairs. The one-day price increase was by far the largest over the last month, said Rodríguez, who expected the pumps to reflect the increase within days.
The increase in crude oil marked the second time in four months that the price of oil has reached the $55-a-barrel mark. Prices set records rising above $55 a barrel in October, but fell again to around $42 a barrel in December. Since then, the price has fluctuated upward.
Last month, Puerto Rico Electric Power Authority (Prepa) Executive President Héctor Rosario told the press that if oil prices remain at their current level, alternative sources of renewable energy could become economically viable. Until now, renewable energy sources have been unable to deliver energy at the so-called avoided cost of 6 cents per kilowatt-hour. The authority, once 97% dependent on oil, in recent years has diversified its energy sources by approving construction of the 540-megawatt natural-gas-fired EcoEléctrica plant and the coal-fired, 454-megawatt AES plant. Prepa is now only 71% dependent on oil.
Iván Nicolau, a spokesman for the College of Engineers, said oil prices around $50 a barrel would definitely make renewable sources of energy economically viable. But he said Prepa lacks the political will necessary to adopt renewable energy sources. He said converting away from oil to any other source of energy would require an enormous capital investment. Nicolau noted that the actual cost of burning oil for energy, if calculating in the cost to human health and environment, is more in the order of $110 a barrel.
Meanwhile the high price of crude oil has resulted in record-setting profits for oil companies. In 2004, Exxon Mobil, the worlds largest publicly traded oil and gas firm, reported $25 billion in profits, the highest in the companys history. Exxon Mobils profits were up 17.2% over $21.5 billion earned in 2003. According to the Guardian, the profits are roughly equal to the Gross National Product of Luxemburg or Guatemala and higher than the individual GDPs of Syria, Bulgaria, and Kenya. In 2004, the United Kingdom-based Royal Dutch / Shell Group posted the largest profits in UK history with earnings of $17.59 billion. The French company Total, which recently bought 100 Citgo stations in Puerto Rico, increased profits 23% in 2004 to post earnings of $11.9 billion.
This Caribbean Business article appears courtesy of Casiano Communications.