NEW YORK—Curtailed oil supplies from Libya and the prospect of popular revolts spreading in the energy-rich Middle East sent global oil prices rocketing to multi-year highs on Wednesday.
For a second straight day, oil prices in New York and London hit highs not seen since 2008, as traders panicked about events in the Middle East and economists worried about the repercussions for the global recovery.
The main US contract ended the day at $98.10 a barrel after crossing the symbolic $100 threshold for the first time since October 2008.
London’s main Brent contract – which is more sensitive to Middle East unrest thanks to Europe’s greater dependence on oil from the region – surged $5.47 to $111.25 a barrel.
With foreign oil workers fleeing Libya and rumors swirling that embattled leader Moamer Kadhafi may sabotage pipelines, analysts raised the prospect of a bona fide oil crisis.
“If Libya and Algeria were to halt oil production together, prices could peak above US$220,” Michael Lo of Nomura warned clients.
With US prices up by around $10 a barrel in the last two days, consumers can expect to pay higher prices at the pump, perhaps in the region of 25 cents a gallon, according to one estimate.
That has policy makers worried.
With much of the global economy still ailing from the financial crisis, many fear sharply higher oil prices could smother the recovery and send many nations spiraling back into recession.
“A one-penny increase in the price of a gallon of gasoline acts as a sales tax on consumers at the rate of $1.2 billion a year,” said David Kotok of Cumberland Advisors, quoting research from Naroff Economic Advisors.
And, he warned, “this is nowhere near over. We are watching a ‘sea change’ occur among one tenth of the world’s population,” adding the turmoil could cause a double-dip recession in the United States.
President Barack Obama’s top economic advisor Austan Goolsbee said prices were not yet at levels that could hurt the economy deeply.
“We continue to monitor the events of the Middle East and the fuel markets, because high fuel costs do have a negative impact on the economy,” he said.
“Thus far we are not forecasting… that at these levels they would derail the recovery.”