Because of the unrest in Libya, oil prices briefly touched $100 a barrel Wednesday for the first time since 2008. It’s a development that’s expected to have a ripple effect on prices across the board.
Fasten you seat belts and tighten your purse strings because the cost of just about everything is about to go up even higher. Say thank you to Libyan strongman Moammar Gadhafi.
“The timing couldn’t have been worse. The economy was just starting to brighten, starting to look a lot better and then we get this real serious instability in the Middle East,” Beth Hernsohn of the Oil Price Institute told CBS 2’s Marcia Kramer.
The uncertainty in Libya, which is a major oil exporter, has already contributed to a 60 cents per gallon hike in home heating oil prices and a 50 cents per gallon jump in gas pump prices in the last three months. But that’s just the tip of the nightmare consumers will face. Experts said the cost of everything transportable – produce, bread, meat, groceries, clothing and most other retail goods – will skyrocket in the blink of an eye.
How high will prices go?
“I have seen increases of 5 to 10 percent. Companies could keep it to that. If they add in transport I guess another couple of percentage points,” Hernsohn said.
“It is outrageous that what happens in Libya affects New Yorkers and Americans at the gas pump, but we’re always subject to that to the vicissitudes of these foreign dictators and everybody else if we’re still dependent on foreign oil,” Sen. Chuck Schumer said.
The long-term solution, according to Schumer, is to explore natural gas and nuclear power, but the short-term solution may be for President Barack Obama to release some of the nation’s strategic petroleum oil reserves.
“The question is will it be effective? And if it will be effective we should use it. It takes a few days to figure out the patterns. And the study it works to prevent a spike. It doesn’t work over the long term because there’s not enough oil in it,” Schumer said.
And as oil prices continue to rise, here’s a frightening statistic: economists estimate that every $1 rise in the price of a barrel of oil adds about two and a half cents to the price of gas, and as gas goes up so does the cost of everything you buy.
WCBS 880′s Sean Adams got a lay of the land up in Westchester County on Wednesday. Gas was $3.59 on the Merritt Parkway in Greenwich, $3.63 on the Hutchinson River Parkway in Harrison, $3.65 in Scarsdale, and $3.99 on the Hutchinson River Parkway in the Bronx.
A year ago in the New York City area, gas prices were closer to $2.88 per gallon.
The bargain of the morning was discovered in Tarrytown where it was $3.47 a gallon.
Livery driver Larry Farrah said he pays for his own gas, so he shops around.
“I go out to Jersey a lot, so I save some money out there,” Farrah said. “I mean, other than that, there’s nothing you can do,” he added
One man said his summer could be quiet: “Weekends, I just stay home… I don’t go out if I don’t have to.”
With the unrest in Libya, any oil production loss can be absorbed by larger suppliers like Saudi Arabia.
But the fear is that political upheavals in the Middle East will spread, and that has analysts worried about a major oil supply disruption down the road.