If customers need more oil, Saudi Arabia is willing to produce it. That’s the position taken over the weekend by Saudi Arabia’s oil minister during a high-level oil summit in a Saudi port city. But the Saudis, the world’s biggest oil exporters, aren’t talking about any specific output increase. They had already announced modest increases, which haven’t done much to stem the skyrocketing price of oil. Saudi’s King Abdullah says his country isn’t to blame for soaring oil prices. Instead, he points to speculators, high fuel taxes in consuming countries, and increased oil consumption in developing countries.
Energy Secretary Samuel Bodman says insufficient oil production, not speculation, is what’s behind the soaring crude prices. In Saudi Arabia for Sunday’s energy summit, Bodman said oil production has not kept pace with growing demand, especially from developing countries like China and India. Saudi Arabia has largely blamed speculation in the oil markets for the record prices. Bodman acknowledges that commodities markets have experienced a huge influx of money from financial investors in recent years, but he says they’ve been following the market upward rather than causing prices to rise.
A national survey says consumers across the nation are paying an average of ten cents a gallon more for gasoline than they were two weeks ago. The average price of regular gasoline at self-serve stations is at $4.10 a gallon. Mid-grade is $4.22 a gallon and premium is going for $4.33. That’s according to the Lundberg Survey of 7,000 gas stations nationwide. The survey says the average price for gas is $1.10 higher than it was a year ago.
Meanwhile, AAA says regular gasoline is averaging $4.07 a gallon. And premium stands at about $4.48 a gallon. The cheapest gas, according to Lundberg, is in Tulsa, Oklahoma. Los Angeles and Fresno, California had the most expensive gas.
With gasoline prices soaring, lower-paid Houston Independent School District employees may soon get some relief in making work commutes. The school board is considering setting aside $2.85 million to help some 10,000 employees with fuel costs in a meeting this afternoon. Under the proposal, the employees would receive a one-time bonus of $250 in September. The board will vote on the fuel bonus proposal on Thursday after its budget public hearing.
Chevron says it had to shut down its onshore oil production in Nigeria because of a breached pipeline. Chevron gives no firm figures on how much production will be lost, but oil industry officials say it will be around 120,000 barrels per day. Nigerian media report militants sabotaged the pipeline in the southern Niger Delta late Thursday. But the region’s most-potent armed group, the movement for the emancipation of the Niger Delta, says angry youths were behind the attack. The group also says it’s declaring a unilateral cease-fire, and that it will launch no more attacks until further notice. The militant group had attacked a remote offshore facility run by Royal Dutch Shell Thursday, for a loss of about 200,000 barrels of crude per day. That’s on top of the 20 percent of Nigeria’s production already shut down by militant attacks.
The crop damage from Midwest flooding will soon show in food prices. Beef, pork, poultry, and even eggs, cheese, and milk are expected to get costlier. Livestock owners have been forced to slaughter more animals than they normally would because of the soaring cost of animal feed based on corn. An estimated two million or more acres of corn and soybean fields flooded in Iowa, Indiana, Illinois and other key growing states. The trickle-down effect could become more apparent later this year, around Thanksgiving and Christmas. Turkey producers are expected to reduce their flocks ten to 15 percent. Corn prices were already high because of strong overseas demand and ethanol production. Experts say the government will give a partial idea of how many corn acres were lost before July.
It’s a busy week ahead in terms of economic reports, but things don’t really get rolling for a few days. Wednesday, the Commerce Department updates the housing situation with a report on new home sales for May. We’ll also be hearing from the Federal Reserve on interest rates. Later in the week, reports are due out on existing home sales for last month, a final GDP number for the first quarter and personal income and spending for May.