Transcripts

Oil Reaches A Crude New Record High

SUSIE GHARIB: Oil prices skyrocketed today to $133 a barrel and that helped send the Dow tumbling more than 200 points. In New York trading July crude futures surged $4.19 or more than 3 percent to close at a record $133.17. In after-hours trading oil topped $134. Fueling the spike, a big drop in weekly oil inventories. The Energy Department said crude stocks plunged 5.4 million barrels last week, the first decline in five weeks. As Scott Gurvey reports, these record oil prices will mean even higher prices at the pump.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: If you're thinking of hitting the road this Memorial Day weekend, you might want to reconsider. Today crude oil futures headed north of $133 on the New York Mercantile Exchange after government numbers showed an unexpected drop in crude oil and gasoline stockpiles. Refineries did increase their production in the last week. But the fact that supplies seem to be meeting demand is not having any limiting effect on prices. The commodity markets themselves have come under criticism from those who say speculators are driving up prices. But there does not appear to have been a great increase in open contracts in recent weeks and trader Randall Rothenberg said speculators cannot drive the market without support from the fundamentals of supply and demand.

RANDALL ROTHENBERG, OIL & GAS TRADER, BATTALION CAPITAL MANAGEMENT: I believe speculators might have helped, jumping on the boat because of say Goldman's report looking for $150 within the next month or so. But prices go because they make economic sense. And I don't believe markets can misjudge economics so greatly for so long.

GURVEY: John Kilduff of MF Global says one other change which helps support prices is the fact that investors are now looking to energy as an important part of their portfolio.

JOHN KILDUFF, SR. VP, ENERGY, MF GLOBAL: Portfolio managers of all stripes are doing what they think is prudent, which is investing in energy to hedge themselves and their portfolios, their equity portfolios, their bond portfolios, against the likely economic dislocation that these high energy prices are going to produce.

GURVEY: Higher oil prices will also hit vacationers even if they leave their cars at home. Airlines are struggling to cope for higher prices for jet fuel and Amtrak is reporting increased demand for trains which are more fuel efficient than cars or planes. While Americans are complaining, overseas many are laughing. Gasoline prices in most countries have been far higher than American prices for years. Much of this is due to taxes which recently pushed the price of gas in France, Germany and the UK well above $8 a gallon. It is nearly $5 a gallon in Japan and Canada. There are some places where you can get really cheap gas. You just have to travel a bit. The recent price in Saudi Arabia, $0.45 a gallon. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.