Oil price worries if Mideast unrest spreads

In a worst-case scenario, crude oil prices could soar, followed quickly by gasoline and heating oil prices, if the unrest in Egypt spread to major oil-producing countries in the Gulf region, interfering with their production, or if the Suez Canal or a pipeline that runs parallel to it were closed, petroleum experts say.

But reports Tuesday indicated that oil infrastructure and shipments had been unaffected so far.

U.S. oil futures, which traded at two-year highs Monday on fears of major disruptions, receded Tuesday. Benchmark crude fell $1.42 to settle at $90.77 on the New York Mercantile Exchange. But the European benchmark crude rose 73 cents to $101.74 a barrel in London. It was the highest settlement for the European benchmark since Sept. 26, 2008, Bloomberg News said.

Trader and commodities analyst Stephen Schork, editor of The Schork Report in Villanova, Pa., said the biggest risk for U.S. consumers is popular unrest spreading to nations that are major oil producers. "If you start to see riots in Saudi Arabia," said Schork, "all bets are off."

About a million barrels a day of crude oil is shipped from Saudi Arabia to North America, according to the website of the Organization of Petroleum Exporting Countries, but those totals are exceeded by those from the West African nation of Nigeria and by Venezuela, based on 2009 data.

Andy Lipow, president of Houston consulting company Lipow Oil Associates Llc, said that if the canal or pipeline were inoperable, tankers would have to work their way around the Horn of Africa to points west - a 6,000-mile detour. "Europe would then be caught short of crude for several weeks," he said, which would cause prices to spike everywhere quickly, including at U.S. gasoline pumps.

Egypt, said Lipow, consumes about as much as it produces and, so, is not a net provider to anywhere else in the world, nor are Tunisia and Jordan, which also have seen popular unrest since last month. But various sources say about 2.5 percent of the world's oil moves through Egypt via the canal or the parallel pipeline.

Crude oil and refined products prices have been rising since late summer on a combination of factors, including a migration of investor cash to commodities like oil.

Regular gasoline averaged $3.397 a gallon on Long Island Tuesday, the AAA said, representing a slight decline - less than a cent - from a week earlier, but still 48 cents a gallon above a year earlier.

Heating oil took another sizable jump, to an average Monday of $3.686 - up 4.5 cents from a week earlier, 66.1 cents higher than a year earlier and the highest since Oct. 6 of 2008, as cold weather continued to keep demand strong. The average price for the fuel that most Long Islanders use to heat their homes has risen by almost 71 cents a gallon since its recent low in mid-August in the state survey.

With Bloomberg