Transcripts

Oil Prices Gush To $100 A Barrel

SUSIE GHARIB: The New Year begins with a new milestone for oil prices: $100 a barrel. After crossing that level, it finally settled at a record close of $99.62, up $3.64 or nearly 4 percent. Fueling today`s spike, concern that new violence in Nigeria could further reduce oil output from that nation. Suzanne Pratt looks at whether $100 oil is here to stay and how it could affect the U.S. economy. SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: It finally happened after months of worrying about the $100 milestone. The price of crude briefly hit it today at the New York Mercantile Exchange. According to the Merc, one single futures contract traded at midday at $100 a barrel. And oil trader Evey Stanziale believes oil prices will move higher in the coming weeks.

EVARISTO STANZIALE, OIL TRADER, SCS COMMODITIES: Don`t be surprised to see a 105 print or a 110 print. And say, oh wow. I think the $100 price is just the tip of the barrel as far as where we`re going to be headed.

PRATT: Speculators were big buyers today as violence in oil producing Nigeria, concerns about tight U.S. oil inventories and a weaker dollar contributed to bullish sentiment. Those factors plus other geopolitical tensions and increasing demand for oil helped push crude prices up nearly 60 percent last year. Gasoline and heating oil have also moved higher in recent months as both are derived from crude. But, experts say the U.S. economy has weathered the rising energy costs fairly well and Bear Stearns economist Conrad Dequadros thinks it will continue to do so in 2008.

CONRAD DEQUADROS, SR. ECONOMIST, BEAR STEARNS: Obviously, there are significant risks and energy prices are just another one of those risks. But, at this point we think that those risks from the housing market, from oil prices, from the turmoil in the financial markets all points to slow growth rather than recession.

PRATT: Still, higher energy costs are sparking new concerns about inflation. And some economists believe higher prices for finished goods will keep the Federal Reserve from cutting interest rates.

DEQUADROS: It`s something that`s likely to make rate cuts following the January meeting somewhat unlikely. Our feeling is that they will cut rates again in January, then they will hold the Fed funds rate steady at 4 percent through the middle of the year.

PRATT: Experts predict another volatile day of trading in the energy markets tomorrow. The government releases its weekly inventory data and another drop in U.S. stockpiles of crude oil is expected. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.