Analysts speculate on impact of rising oil

NEW YORK -- Record high crude oil prices will have an impact on consumers and the economy.

Q. How will $100 oil affect the prices I pay for energy?

A. Higher crude prices will almost certainly drive up the cost of refined products, although the gasoline pump may not be the first place consumers see prices rise.

"There are some immediate consequences. That's on the heating oil, diesel and jet fuel side," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service. "The higher gasoline prices are further down the road."

Kloza expects gas prices will peak close to $3.50 or $3.75 this year.

Families that rely on heating oil are already being stung. The Energy Department predicts heating oil costs will rise 33 percent this winter.

Q. How will the price of oil affect what I pay for other goods and services?

A. "These higher prices will flow throughout the economy," said Tim Evans, an energy analyst at Citigroup Inc. "The more difficult question would be to find a product that does not have an energy component."

Higher diesel prices will drive up the cost of most goods transported on the nation's highways. Those increased shipping costs will almost certainly be passed on to families and individual buyers.

Evans said people likely will also see increased fuel surcharges on airline tickets, as well as higher package delivery costs and possibly even a rise in the price of first-class mail.

Products made from petroleum itself, such as plastic and certain types of fertilizer, are also likely to be more expensive, and that in turn could push up the cost of food.

"Even the cheap, flimsy plastic caps for the top of our coffee cups will rise in cost," Evans said.

Q. What impact will higher oil have on the overall economy?

A. Analysts say consumers, whose spending is critical to economic growth, have held up well so far, even with gas already having climbed above an average of $3 a gallon. But that assessment could change if oil prices keep skyrocketing.

Major oil producers such as Exxon Mobil Corp. and ConocoPhillips stand to benefit from higher prices, while airlines, automakers and other fuel-sensitive industries could suffer.

Q. But wouldn't a U.S. economic slowdown cause oil prices to drop?

A. It depends on whom you ask. Some experts say prices at $100 a barrel aren't sustainable. Evans said he believes the high prices are a sign of a speculative bubble that will eventually burst.

"All of the implications for $100 oil are bearish. It is going to translate into less demand in the future," he said.

But Jeffrey Rubin, chief economist of CIBC World Markets, has for months been predicting oil would reach $100 a barrel based on fundamental market realities. He told investors in October to expect "a world of triple digit oil prices for the foreseeable future."