Crude oil futures hit $100 a barrel for the first time on Wednesday as U.S. inventories rose and violence in oil-rich Nigeria stoked fears of a drop in production. The news fed fears that the economy would buckle under the combined strain of high energy prices and the subprime mortgage crisis. (Sacramento Bee)
What the commentators said
Hundred-dollar oil may be “hard to stomach,” said David Fleischaker, Oklahoma’s energy secretary, in The Washington Post (free registration), “but it’s good for us.” It will force us to develop more fuel-efficient vehicles and encourage investors to bankroll new technologies and energy infrastructure, reducing our dependence on foreign oil and reducing the growth of greenhouse gas emissions in the bargain.
Try telling that to consumers if high oil prices push the country into a recession, said Moira Herbst in BusinessWeek.com. That’s just what could happen if higher heating oil and gasoline prices force Americans to tighten spending on other things. “If the Federal Reserve continues to cut interest rates and accommodate high oil prices, inflation will ensue” and a recession won’t be far behind.
Perhaps, said the Los Angeles Times in an editorial (free registration), but $100-a-barrel oil “doesn't necessarily portend a return to Carter-era doldrums.” Rising oil prices have pushed the price of gas from $2.20 a gallon to $3 in the last year, and $4 is “looking increasingly possible.” But so far the effect has been relatively modest as inflation remained low, and Americans eased the pain by parking their SUVs and using smaller cars.