Monday, July 06, 2009

Volatile Swings for Price of Oil Hobble Industry

From the NY

The extreme volatility that has gripped oil markets for the last 18 months has shown no signs of slowing down, with oil prices more than doubling since the beginning of the year despite an exceptionally weak economy.

The instability of oil and gas prices is puzzling government officials and policy analysts, who fear it could jeopardize a global recovery. It is also hobbling businesses and consumers, who are already facing the effects of a stinging recession, as they try in vain to guess where prices will be a year from now — or even next month.

A wild run on the oil markets has occurred in the last 12 months. Last summer, prices surged to a record high above $145 a barrel, driving up gasoline prices to well over $4 a gallon. As the global economy faltered, oil tumbled to $33 a barrel in December. But oil has risen 55 percent since the beginning of the year, to $70 a barrel, pushing gas prices up again to $2.60 a gallon, according to AAA, the automobile club.

“To call this extreme volatility might be an understatement,” said Laura Wright, the chief financial officer at Southwest Airlines, a company that has sought to insure itself against volatile prices by buying long-term oil contracts. “Over the past 15 to 18 months, this has been unprecedented. I don’t think it can be easily rationalized.”

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