Oil Prices Keep Rising

The price of crude oil hit a new high yesterday (for the year, at least) of nearly $40 per barrel. The price of gasoline rose in lockstep. Prices at the pump will keep rising as long as the price of crude oil does.

Many analysts say that the price of oil has primarily risen due to an increase in the risk premium attached with oil, due to things like this week’s attack on oil facilities in Saudi Arabia. (Yes, high demand in China has certainly played some role, but I’m not convinced that China’s demand has changed that much in the past few months.) If the increased risk premium is indeed the principal cause of the recent run-up in oil prices, then I fear that the increase could be with us for a while – I don’t foresee any reduction in the risks to oil facilities in the middle east any time soon. Furthermore, I’m starting to think that this rise in oil prices, if it’s sustained for a little longer, will start to have some noticeable negative effects on the economy this summer. We may have a slowdown in the economy later this year after all.