CANADIAN PRESS
CALGARY (CP) The world's oil suppliers have lost control of the markets, ceding that power to traders and giving rise to greater volatility in crude prices, U.S. Energy Secretary Samuel Bodman said Friday.
With oil hitting record highs of more than $78 US per barrel Friday in the wake of increasing violence in the Middle East, Bodman said crude is now traded like securities "and so emotion enters into it."
"This is the first time in my professional lifetime that the suppliers of oil in the world have really lost control of the markets," Bodman said during a two-day trip to Western Canada where he toured the rapidly developing oilsands region in northern Alberta.
"They are unable to turn the spigot and increase supplies, and therefore are unable to control oil prices."
To that point, the Organization of Petroleum Exporting Countries issued a statement Friday in which it blamed geopolitical factors beyond its control for the recent price volatility. The group emphasized that the market is "well-supplied with crude."
Bodman said the current run-up in crude prices is directly related to geo-political instability in key energy producing countries around the world, adding that he hoped prices would recede once things calmed down.
"We have found that the U.S. economy has been surprisingly resilient, surprisingly able to manage the increase in prices that we have already seen. I am hopeful that it will continue to do so. Time will tell."
But the run-up in oil raised concerns about inflation and the U.S. economy at large, causing the Dow Jones industrial average to shed 106.94 points to 10,739.35.
The price of crude for August delivery climbed 33 cents to settle at a record $77.03 US a barrel on the New York Mercantile Exchange, as Israel widened its offensive in Lebanon, stoking fears that supplies from major producers including Iran could be disrupted. Oil hit a record intraday high of $78.40 US.