Tropical storm could be 'nightmare scenario' for oil prices

Tropical storm could be 'nightmare scenario' for oil prices

28 August 2008

Homeowners could see the cost of heating oil increase in the near future as oil prices continue to rise.

Despite still being far off the record high of $147 (€99.61) seen last month, fears that Tropical Storm Gustav could disrupt production in the Gulf of Mexico prompted a $1.88 increase yesterday.

That put the cost of a barrel of crude oil at $118.15 and this figure is likely to rise even higher if the storm arrives as a hurricane and causes damage like that by Katrina and Rita three years ago.

"A bad storm churning in the gulf could be a nightmare scenario. We might see oil prices spike $5 to $8 if it really rips into platforms," analyst Phil Flynn of Alaron Trading was quoted by the Associated Press as saying.

Some companies have already prepared for the worst by evacuating workers from oil rigs.

The fears follow last month's news that the production of at least one refinery was shut down when Tropical Storm Dolly hit the region.

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