Oil Prices in the tank

It looks like oil prices are in the tank after BP announced yesterday they would be shutting down oil production in the Alaskan North Slope region. The resulting production loss accounts for about 400,000 barrels a day or roughly 8% of the total U.S. output. It will also account for about 2.5% of BP's total worldwide production. Considering oil prices were already high, this will force them to rally even further.

As of this posting, prices were hanging around $77.05 a barrel and climbing on the Nymex and gas prices were around $2.26.

The Wall Street Journal reported:

The average U.S. retail price of a gallon of unleaded, regular gasoline was $3.036 on Monday -- near its all-time high of $3.057, reached Sept. 5 after Hurricane Katrina hit the Gulf Coast. "I suspect that record will fall in the next 48 hours,'' said Tom Kloza, an analyst at Oil Price Information Service in Wall, N.J., noting that pump prices around the country are likely to rise 5 to 10 cents a gallon.

BP new this area was having problems though as these pipelines were corroding and they had huge problems about 6 mos. ago Again from the WSJ:

In March, a BP transit line in the North Slope spilled 267,000 gallons of oil. It was a month before BP was able to install a bypass on that line to resume operations. BP is currently under criminal investigation for that spill. "It makes you wonder, if this time the pipeline will be shut down longer than it was in March because inspection will be more stringent,'' said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.

This is in addition to all the other "normal" things that kick fuel prices up like war in the Middle East, hurricanes, people driving the cars, etc.

This is just one more reason these folks need to kick up our fuel prices. I'd say oil will probably hit $80 a barrel before the week's out and gas maybe $3.30 a gallon fore unleaded. I'd hate to be an incumbant right now.

I will say the Energy Dept. is prepared to dump some oil onto the market but this announcement doesn't seem to have calmed the market much. There's no timetable on how long fixing this problem might take either.

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