The price of oil rose another 7 percent, briefly topping $67 a barrel in New York futures trading before ending the week at $66.86, a new high. Gasoline prices rose in sync, topping $2 a gallon at wholesale and reaching $2.40 on average for a gallon of regular at the pump in the Washington area.
The explanation for last week's price hikes runs the usual gamut -- a rash of outages in refineries, possible political instability in the Middle East and fresh forecasts of stronger-than-expected consumption and weaker-than-expected supplies. In truth, energy markets at this point are so nervous -- or speculative -- that almost any event is an excuse to bid up prices and lock in supply.
The effects of higher energy prices now routinely show up in the economic statistics, as well as in President Bush's lagging approval ratings. On Monday, Bush signed an energy bill that even he acknowledged would have little impact on short-term prices.
Treasury Secretary John W. Snow estimated that energy costs have already shaved half a percentage point off the economic growth rate. The University of Michigan reported a decline in consumer sentiment, which it attributed to fuel prices. And the rising cost of imported fuel drove the trade deficit to a higher-than-expected $58.8 billion in June. This week, the government will report its monthly price indexes for July, with analysts predicting they will show consumer prices up 3 percent over the past year, and producer prices spiking 4 percent. Hoping to forestall an acceleration in the inflation rate, the Federal Reserve raised short-term interest rates for the 10th time since June 2004, with further increases in the offing.
On Wall Street, energy jitters had the effect of canceling out the positive effects of several strong earnings reports.
Topping the list of casualties from $67-a-barrel oil is the nation's airline industry, despite fuller planes and rising fares. Runaway fuel prices now threaten to drag two more airlines into bankruptcy while keeping those already there even longer. Delta and its pilots began yet another round of talks on pay cuts as the company acknowledged a possible cash crunch and delayed filing its quarterly financial statement. Flyi Inc., parent of Independence Air, said it lost $98.5 million last quarter, nearly four times what it lost in a comparable period last year, and said it had hired advisers to prepare for a possible bankruptcy filing.
As the Wall Street Journal noted, because of refining shortages, the price of jet fuel has risen even faster this year than the price of crude oil. Bear Stearns analyst David Strine calculates that if jet fuel prices had risen at the same pace, that alone would have saved the nine largest airlines more than $400 million last quarter -- more than enough to wipe out their collective $227 million in operating losses.