- Gabby Giffords’ gun control push gets high-profile speaker: Bill Clinton
- Tony Blair to warn West: Take sides against radical Islam
- Pfc. Bradley Manning’s name change to Chelsea heads to court
- NYPD’s attempt at positive Twitter outreach campaign proves to be an epic fail
- Michigan man among first in U.S. to get ‘bionic eye’
- JetBlue pilots vote to unionize; 2 previous attempts failed
- Pentagon plans to replace flight crews with ‘full-time’ robots
- Navy’s military dolphins may meet Putin’s porpoises in Black Sea
- Forget the Porsche — it’s the guy with the Prius that attracts the ladies, poll shows
- Fired Russian Facebook CEO says site has fallen in the hands of pro-Putin supporters
Officials try to ease oil worries
Market shakes analysts again
The White House on Thursday downplayed the danger to the economy from rapidly rising oil prices, which are flirting with $100 a barrel amid rising unrest in the Middle East, but many private economists worried that it might stifle this year’s much-anticipated revival of growth and jobs.
Whether the oil spike proves to be an obstacle depends on how high prices go and how long they stay there. The price of a barrel of premium crude jumped as high as $103 in New York trading Thursday morning, but by afternoon had fallen back to a little over $96.
Those were the highest levels since the oil price spike of 2008, which led to $150-per-barrel oil and $4-per-gallon gasoline and helped sink the global economy into recession.
The surge in prices this week was provoked by the cutoff of production of as much as 1.3 million barrels a day of premium crude from Libya amid an outbreak of civil war. Part of the rise also owes to fears that even larger oil producers such as Iran and Saudi Arabia could be engulfed in the spreading unrest.
At a minimum, economists say, the situation is a recipe for volatility in the oil market — and elevated prices — for some time to come.
Prices retreated abruptly in New York on Thursday after Saudi Arabia assured the markets that it would pump extra oil to make up for the Libyan shortfall and the White House put down a rumor that Libya’s autocratic leader, Col.Moammar Gadhafi, had been shot.
In electronic trading Thursday night, prices started to creep back up toward $100.
The price of premium crude in London has surged as high as $114 a barrel in the past week.
President Obama, in remarks before a panel of business leaders at the White House, said he was confident that the markets would “ride out” the unrest and that prices eventually would stabilize without doing lasting damage to the economy.
Treasury Secretary Timothy F. Geithner added that there’s little cause for worry because the world has substantial inventories and reserves of oil to cover the lost production from Libya.
Austan Goolsbee, chairman of the White House Council of Economic Advisers, also downplayed the potential for economic harm, saying the picture is much different from the oil crisis of 1979 because the nation is “substantially more energy-efficient” than it was then.
“The sensitivity of the economy to oil prices is not as great as it was in the past,” he told reporters at a breakfast sponsored by the Christian Science Monitor. “The impact of oil prices comes from long-run, sustained increases to prices, not from short-run variations.”
“Nobody likes to pay higher fuel costs,” Mr. Goolsbee said, but “anything like what we’re seeing so far neither we nor the private sector has forecasted that would derail our recovery.”
Many private forecasters were not as confident as Mr. Goolsbee suggested, and some warned of a potent threat to the economy.
“The fairly strong growth momentum the economy had when it entered the year suddenly hit a major speed bump,” said Bernard Baumohl, chief global economist at the Economic Outlook Group.
Fear and uncertainty already have hit the economy, he said after talking with businessmen and investors in recent days. Many are starting to put off their spending plans until they see how high oil prices rise and whether the oil spike is sustained.
“Business managers are starting to get orders to put things on hold until there is greater clarity on where oil and gasoline prices will settle. After all, no one wants to be in a position to fill stockrooms and back lots with inventory if economic activity is about to slow,” he said.
Hiring plans also are being postponed, he said. “Why ramp up hiring if there is risk that consumer and business spending may taper off?” he asked.
“Perhaps the single greatest concern is that these geopolitical events could herald a ‘new normal’ for oil prices, with crude settling in the range of $100 to $150 a barrel from this point on,” he said.
That possibility is realistic rather than alarmist, he said, because “the old order for some countries across North Africa is already gone” and more regimes in the region seem likely to exit as well, leaving an “amorphous” state of affairs that will “keep risk levels high for years.”
Dan North, an economist at Euler Hermes, called it a “worst nightmare come true” for the economy and the Federal Reserve, whose loose money policies he said set off an inflation spiral in food and fuel prices last fall that contributed to the unrest in the Middle East.
“Oil prices rising this fast, to this level, pose a significant risk to growth,” he said. “Once again, the U.S. finds itself at the mercy of rising oil prices without a sufficient supply of its own.”
• Kara Rowland contributed to this report.
© Copyright 2014 The Washington Times, LLC. Click here for reprint permission.
About the Author
- Stalemate on the Hill may spare Fannie and Freddie from reform
- U.S. Treasury warns China on currency
- IMF gives U.S. Congress year-end deadline for passing reforms
- IMF eyes 'Plan B' for reforming itself without U.S.
- Russia, China leading efforts to bypass U.S. as IMF reforms stall on Capitol Hill
Latest Blog Entries
TWT Video Picks
Feds who send arms against ranch families betray American values
- CARSON: When government looks more like foe than friend
- Nevada rancher Cliven Bundy hailed as patriot, ripped as lawless deadbeat
- Tactical advantage: Russian military shows off impressive new gear
- IRS revokes conservative group's tax-exempt status over anti-Clinton statements: report
- Ministry of Truth: SCOTUS skeptical of law to police campaign 'lies'
- America is an oligarchy, not a democracy or republic, university study finds
- HURT: President Obama's 'Selfie Doctrine'
- SOWELL: The high cost of liberalism, open spaces and affordable housing
- Ukraine claims torture by pro-Russian forces on the heels of Biden's stern warning to Moscow
- Sen. Elizabeth Warren: 'I'm not running for president'
Top 10 handguns in the U.S.