Oil prices hit $100 a barrel

FUELED BY LIBYA: U.S. gas prices reach new high for February.

February 23, 2011 

Oil prices topped $100 per barrel Wednesday for the first time in 2 1/2 years as the unrest in Libya worsened. Gasoline prices in the U.S. climbed to nearly $3.20 a gallon, the highest level ever for February.

Alaska North Slope oil closed at $102 a barrel on West Coast open markets. That was up $2.93 a barrel for the day.

The last time North Slope prices topped $100 was in September 2008, when they were falling. By Christmas that year the price had hit bottom at $26 before slowly beginning to rise again.

The state gets more than 80 percent of its general revenue from the North Slope oil fields. And the higher than expected prices of recent months boost the flow of that oil revenue. For the state budget year that began July 1, revenue forecasters predicted an average oil price of $78 a barrel; but the actual average has been about $83.

The uprisings in Tunisia and Egypt this month already had markets on edge before protests escalated in Libya, which has the biggest oil reserves in Africa. The rebellion widened Wednesday as protesters overwhelmed government buildings and advanced around Tripoli, the capital.

French oil giant Total said it started to wind down its oil operations in Libya, where it produced an average of 55,000 barrels per day last year. That follows similar moves by other oil companies.

Libya's biggest oil producer, Eni, idled operations that produce 244,000 barrels of oil and gas per day. Spain's Repsol-YPF and Austrian oil company OMV also suspended operations. Germany's Wintershall said it shut down operations that produced up to 100,000 barrels of oil per day. Evacuations of oil company employees and their families continue.

Barclays Capital estimates that as much as 1 million barrels per day of production has been shut down so far. In January, Libya produced almost 1.7 million barrels per day of oil and natural gas liquids, according to the International Energy Agency.

The production losses will be felt mostly in Europe. Ireland relies on Libya for 23 percent of its oil imports, while 22 percent of Italy's oil imports are from Libya. The U.S. imported only about 51,000 barrels per day from Libya, less than 1 percent of its total crude imports.

The International Energy Agency and Saudi Arabia have pledged to make additional oil available to cover any shortfall in world supplies, but that hasn't eased tensions in oil markets.

Larry Goldstein, a director at the Energy Policy Research Foundation in Washington, said Libya's oil is a high-quality variety that is used to produce products like gasoline, jet fuel and diesel. Some refineries won't be able to run on Saudi Arabia's lower-grade crude, so a sustained shutdown in Libya could start a bidding war for comparable kinds of crude.

"That would raise product prices immediately," Goldstein said.

Analysts are watching similar protests in oil-rich Bahrain. Barclays analyst Helima Croft said the uprising in Bahrain could spill over to the eastern provinces of Saudi Arabia. While it probably won't hurt the Saudi's huge oil-production operations, "it's going to make a lot of people nervous," Croft said.

The national average for a gallon of regular gasoline rose 2.3 cents Wednesday to $3.19, according to AAA, Wright Express and Oil Price Information Service. Gas has jumped 8.2 cents per gallon in the past month and $1.28 in the past year.

In Alaska, the average gasoline price was $3.64 a gallon, the nation's second highest average after Hawaii's.

The average price in Anchorage was $3.55 a gallon, up 1.5 cents for the day, AAA said.

Tom Kloza, publisher and chief oil analyst at Oil Price Information Service, said he expects gasoline prices will continue to rise in the next few months to between $3.25 and $3.75 per gallon nationally as the spring driving season approaches.

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