Price of oil fell below $99 a barrel today amid investor concern that the lack of an agreement among U.S. lawmakers to raise the country’s debt limit could trigger a default and damage the global economy.
Brent crude gained $1.16 to settle at $118.67 per barrel on the ICE Futures exchange in London.
Brent is widely considered a better indicator of global oil prices than New York Mercantile Exchange crude futures. Fuel prices in many parts of the U.S. and in the Northeast in particular, track changes in Brent.
Investors are concerned that the failure to resolve debt problems in the U.S. and Europe could cause the global economy to slow, cutting demand for commodities like oil.
So $5 per gallon is still possible?
Well yes. And here are some scenarios:
a) U.S. Government default that causes institutional investors to dump U.S. Government bonds, triggering a plunge in the dollar, pushing up oil’s price
b) any sustained unrest in another oil producing nation in the Middle East; and
c) stronger growth in Asia/Latin America emerging market economies, most of which are registering large annual percentage increases in oil consumption.