Japan’s quake threatens U.S. oil prices

Source : 24X7 Updates, by Eligna March 12,2011

As Japan’s earthquake slammed its extensive refining capacity, volatility in oil prices could further increase gasoline prices at American gas-pumps, predict industry experts. The 8.9 magnitude earthquake and the tsunami catastrophe has shattered Northern Japan’s automobile and steel factories, trapped thousands in workplaces, and finally battered the Asian and European financial markets.

 

But, analysts’ worldwide fear the most severe aftermath of Japan’s tremors could be the forthcoming skyrocketing oil prices, which could further hurt the steady global economic recovery. The tremor disaster has compelled the close down of the island nation‘s several oil refineries and nuclear power units. 

Japan’s quake threatens U.S. oil prices

Fuel analysts anticipate that if Japan’s oil refining facilities fail to revive promptly, the country’s demand for jet fuel, diesel and gasoline would surge tremendously. In the wake of arising situation in Japan, many global fuel suppliers, including major Californian refineries, could divert their consignments to Japan, as suppliers earn more profits from exporting fuels to other countries. If the anticipations turn correct, fuel analysts like James DiGeorgia, editor of the Gold & Energy Advisor feared a fuel crisis situation in U.S. DiGeorgia says "The sudden importation of large amounts of distilled products is expensive and it's a heavy logistics burden. That is going to drive up the market price for everything from diesel and gasoline to jet fuel." Sluggish U.S economy can’t bear oil volatility. As per the recent reports, Japan’s two major nuclear power plants are closed down, since the earthquake. The prolonged shutdown may spike fossil fuels demand, expects Bob van der Valk, a fuel-price specialist and consultant. Bob van der Valk, a consultant and fuel-price specialist, also said it can’t be denied that West Coast would amend for the fuel shortage owing to this shutdown.

The current sloppy U.S. economic recovery has tightened up the consumers’ purchasing power and at present Americans could not afford increased fuel prices. As indicated by AAA, the U.S. standard gasoline was $3.54 per gallon, witnessing a 7 cents hike since last week. While in California it stood at $3.94 per gallon. Oil prices volatility unlikely to resolve any sooner. Amid all speculations, crude oil futures slightly plunged to remain near $100 a barrel, on Friday. Due to Japan’s held up economy and disrupted refineries, global oil demand is likely to reduce to ease global petroleum supply, which was continually restrained by the mid-east and Libyan political crisis. But, as soon as Japan’s economy resurges, oil futures will start reflecting global commodity market. The situation makes oil price highly volatile, predict experts. Meanwhile, as fuel prices continue to affect U.S’s reeling economic growth, President Obama on Friday reassured Americans that his administration has been closely monitoring the fuel supply situations.

Obama asserted, "Here at home, everybody should know that should the situation demand it, we are prepared to tap the significant stockpile of oil that we have in the Strategic Petroleum Reserve,"