NEW YORK - It's only July, but it might be time to start loading up on blankets and sweaters.
Oil spiked to a new trading record as hostilities rose between the West and Iran -- raising the likelihood that this winter's heating bills will be the priciest yet.
Crude oil's brief jump past US$147 a barrel Friday arrived not only as the United States and Israel view Iran as a growing threat, but also as the U.S. dollar fell and worries erupted over possible supply disruptions in Nigeria and Brazil.
Those factors contributed to new all-time trading highs in crude, gasoline and heating oil. It looks like $4-a-gallon gasoline in the United States might be here to stay, and that heating oil costs might cause further problems for consumers as the weather gets colder. Futures prices for natural gas turned lower Friday, but are still about twice as high as a year ago.
"If you think your gasoline bills are expensive now, wait till you get your home heating bill this winter," said Stephen Schork, an analyst and trader in Villanova, Pa.
Heating oil is used mostly in the Northeast United States; homes in most other parts of the country use natural gas. It's possible for people to cut back on heating as they do on driving, but it's not easy to slash the bill significantly.
"We've been building these ridiculous McMansions over the past few years. It's harder to trade in a McMansion than it is an SUV," Schork said. "But you can turn your thermostat down and throw on a sweater."
Political unrest in oil-producing regions -- along with production cutbacks by refineries and fairly resilient demand for diesel fuel -- have been keeping energy costs high.
Iran, which has long been under United Nations scrutiny for its uranium enrichment program, has been testing missiles this week, including a new missile capable of reaching Israel. On Thursday, U.S. Secretary of State Condoleezza Rice warned the oil-producing country that the United States will defend its allies, and Iran responded with another missile launch. Neither the United States nor Israel has ruled out a military strike on Iran.
Then on Friday, there were rumours of Israeli military exercises taking place in Iraqi air space. The rumours were reportedly denied by Israeli officials.
"The war of words is quite heated," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Winchester, Mass. "And it raises the possibility of some serious problems in the area -- either the cutoff of Iranian exports, or Iranian strikes on tankers in the Strait of Hormuz."
About 40 per cent of the world's tanker traffic passes through the Strait of Hormuz.
Meanwhile, Brazilian oil workers were threatening to go on a five-day strike next week unless the state-run oil firm Petrobras gives them an extra day off at the end of their 14-day shift. Those supply worries added to those sparked Thursday when Nigeria's main militant group said it would resume attacks in the oil-rich region.
Light, sweet crude for August delivery soared to an all-time high of $147.27 a barrel before settling at $145.08, up $3.43. That's slightly below last Thursday's settlement record of $145.29 a barrel.
Meanwhile, the U.S. dollar weakened against other major currencies Friday. Because oil is bought and sold in U.S. dollars, oil's rise has not been as severe for countries with stronger currencies; meanwhile, traders have been using commodities as a hedge against the tumbling U.S. dollar.
In Nymex trading, heating oil futures rose to a trading record of $4.1586 before settling at $4.0766 a gallon, up 3.92 cents.
Gasoline futures also rose to a new trading record of $3.631 a gallon before finishing at $3.5632, up 5.23 cents.
The average U.S. retail price for gasoline was at $4.096 a gallon, down slightly from the record $4.108 a gallon reached on Monday, according to auto club AAA, the Oil Price Information Service and Wright Express.
Natural gas futures fell 39.6 cents to $11.904 per 1,000 cubic feet, but only after rising as high as $13.694.
On London's ICE futures exchange, Brent crude settled at $144.49, up $2.46.
