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Chicago Tribune: Crude tops ‘true record’ high

ASSOCIATED PRESS
March 4, 2008

NEW YORK – The surging price of oil reached another milestone Monday, jumping to an inflation-adjusted record high of $103.95.

The weaker dollar that has propelled oil and other commodities prices higher sent light, sweet crude for April delivery past $103.76 a barrel on the New York Mercantile Exchange. That’s the level many analysts consider to be the true record high for oil, after its $38 barrel price from 1980 is translated into 2008 dollars.

Futures later retreated from that high to settle up 61 cents, at $102.45, after Royal Dutch Shell PLC said it would resume oil shipments from Nigeria that had been disrupted by rebel attacks.

Oil’s most recent run into record territory has been driven by the greenback’s slump against other world currencies. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.

“It’s coming down to another commodity price rally,” said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

The dollar has been weighed down by concerns about the U.S. economy and the Federal Reserve’s rate-cutting campaign. Lower interest rates tend to weaken the dollar.

The struggling dollar has prompted a wave of speculative buying by oil investors seeking a safe haven from the ongoing volatility of the stock market. Such speculation can become self-perpetuating, driving prices higher and attracting even more speculators.

Many analysts believe oil prices aren’t justified by crude’s underlying supply-and-demand fundamentals and are due to fall at some point. Domestic oil inventories are rising even as a number of forecasters are cutting their demand-growth predictions because of the slowing economy.

Surging oil prices are boosting prices at the pump. The average price of a gallon of gas stood at $3.165 Monday, according to AAA and the Oil Price Information Service. That’s down 0.1 cents overnight, but up nearly 70 cents from a year ago.

Diesel prices, used to transport the vast majority of the nation’s goods, are also surging. Diesel hit another record Monday, with a national average of $3.674 a gallon.

Page compiled from Tribune staff, wire reports

http://www.chicagotribune.com/business/chi-tue-oil-pricesmar04,0,257730.story

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