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Sat, Mar 20, 2004 - Page 12 News List

Concerns raised over high price of oil

AFP , NEW YORK

Partial view of an oil platform owned by Total Elf Fina off the Angolan coast last year. Economists say that the recent surge in the price of oil, which jumped to its highest level in 13 years on Wednesday in New York, threatens to undermine economic growth.

PHOTO: AFP

The recent spike in crude oil prices poses a new threat to a still-fragile US economic recovery by boosting the cost of energy for industry, airlines and millions of commuters.

The price of light sweet crude surged to US$38.18 a barrel on Wednesday, a 13-year high, before a modest drop on Thursday.

US administration officials along with industry leaders are voicing concern about the jump in prices and the potential effect on the economy, which is still struggling to create jobs.

"Higher oil prices are unwelcome. They act like a tax on American producers," US Treasury Secretary John Snow said in an interview this week. "I would hope that energy prices would recede."

The airline industry, battered over the past three years by a number of factors, is especially sensitive to oil price movements.

American Airlines recently suggested that higher fuel prices could hurt the bottom line of the world's largest carrier.

Delta Air Lines meanwhile said its losses would likely hit US$400 million in the first quarter of this year, up from an earlier projection of US$300 million to US$350 million, in part because of fuel costs.

"Continued pressures on passenger revenue, sustained higher fuel prices and costs associated with the settlement of fuel hedge contracts drove this revision," Delta said.

"Approximately US$47 million, net of tax, of the increase in Delta's March 2004 quarter net loss estimate is attributable to the fuel-related costs," it said.

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