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Crude awakening! Oil hits $90 a barrel

Rick Lisberger of Hart Petroleum fills his truck

Rick Lisberger of Hart Petroleum fills his truck with the winter necessity, heating oil at a depot in New Hyde Park. (November 2010) Photo Credit: Howard Schnapp

Consumers will continue to see gasoline and heating oil prices rise.

That was the consensus among analysts and industry experts as crude oil futures rose to $90.48 a barrel Wednesday and the Department of Energy's weekly petroleum report revealed a 5.3-million-barrel drop in U.S. crude oil supplies.

But there was less agreement about the reasons underlying the forecast price increase. For some analysts the government report coupled with the cold weather and good economic news about the holiday shopping season pointed to increasing domestic demand and a decreasing supply. Others saw the work of excessive speculation.

"Honestly, this is all about building up uncertainty and fear and the idea of an increased demand and the price is going up so you better buy today at $90 before it goes to $100," said Kevin Rooney, chief executive of the Oil Heat Institute of Long Island, a group of retailers. "There are a bunch of traders on Wall Street and other places playing around with commodities like it's some kind of Monopoly game."

While the Energy Department reported the drop in inventories, it also noted they are "above the upper limit of the average range for this time of year" at 340.7 million barrels. Gas inventories increased by 2.4 million barrels.

"If you don't have limited supply and you continue to resupply, where is the upward pressure on price?" Rooney said. "It's not there. It has to be artificially created."

Wednesday, the average price for regular gasoline in Nassau and Suffolk counties hit $3.303, according to AAA, after hovering just below $3.30 for some time.

Rising prices, some analysts say, are the result of changing demand and supply as the economic recovery continues.

ShopperTrak revealed Wednesday that retail sales for the Super Saturday weekend, the last weekend before Christmas, increased 5.5 percent over the same period last year. On last year's Super Saturday weekend, however, retailers had to contend with a major snowstorm.

"This time around is very similar to what we saw in 2006 and 2008, and we're seeing a supply crunch and demand is getting higher," said Carl Larry, president of Oil Outlooks & Opinions Llc, a Houston research and consulting firm. "The difference this time around is as the U.S. is seeing higher demand and climbing back to levels before the recession, the rest of world demand is ahead of us."

- With AP

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