It’s only July, but it might be time to start loading up on blankets and sweaters. Oil spiked to a new trading record as hostilities rise between the West and Iran — raising the likelihood that this winter’s heating bills will be the priciest yet.
Crude oil’s brief jump past $147 a barrel Friday arrived not only as the United States and Israel view Iran as a growing threat, but also as the U.S. dollar fell and worries erupted over possible supply disruptions in two other major oil-producing nations: Nigeria and Brazil.
Those factors contributed to new all-time trading highs in crude, gasoline and heating oil. It looks like $4-a-gallon gasoline might be here to stay, and that heating oil costs might cause further problems for consumers as the weather gets colder. Futures prices for natural gas turned lower Friday, but are still about twice as high as a year ago.
“If you think your gasoline bills are expensive now, wait till you get your home heating bill this winter,” said Stephen Schork, an analyst and trader in Villanova, Pa.
Heating oil is used mostly in the Northeast United States; homes in most other parts of the country use natural gas. It’s possible for people to cut back on heating as they do on driving, but it’s not easy to slash the bill significantly.
“We’ve been building these ridiculous McMansions over the past few years. It’s harder to trade in a McMansion than it is an SUV,” Schork said. “But you can turn your thermostat down and throw on a sweater.”
Political unrest in oil-producing regions — along with production cutbacks by refineries and fairly resilient demand for diesel fuel — have been keeping energy costs high.
Iran, which has long been under U.N. scrutiny for its uranium enrichment program, has been testing missiles this week, including a new missile capable of reaching Israel.
On Thursday, Secretary of State Condoleezza Rice warned the oil-producing nation that the United States will defend its allies, and Iran responded with another missile launch. Neither the United States nor Israel has ruled out a military strike on Iran.
Then on Friday, there were rumors of Israeli military exercises taking place in Iraqi air space. The rumors were reportedly denied by Israeli officials.
“The war of words is quite heated,” said Michael Lynch, president of Strategic Energy and Economic Research Inc. in Winchester, Mass. “And it raises the possibility of some serious problems in the area — either the cutoff of Iranian exports, or Iranian strikes on tankers in the Strait of Hormuz.”
