International Oil Price Surges Past $40

The international crude oil price surged above $40 a barrel after falling a day before, the first time it has done so in 13 years and seven months.

The spot price of West Texas Intermediate (WTI) on Tuesday rose $1.16 to $40.08 a barrel, the record high since October 11, 1990 when it reached $41.02, the Korea National Oil Corporation (KNOC) said on Wednesday.

WTI futures prices, which help to predict future crude oil prices, closed at $40.06, up $1.13.

Brent crude oil future prices were up $1.39, and Dubai crude oil spot prices fell $0.22 to $33.59.

As oil prices continue their upward trend, the price of gasoline in the U.S. surged to a record high of $1.941 per gallon.

Oil prices rose again in one day, as Saudi Arabia’s proposal to increase its oil output was analyzed to be a simple political gesture on U.S. pressure.

On top of that, incidents that worsened political situation in the Middle East, such as U.S. abuse of Iraqi prisoners and the execution of an American hostage by Iraqi insurgents, stirred up the price hikes.

“The oil price may surge to $50 a barrel, hitting the world economy badly,” said Steve Roach, chief economist at Morgan Stanley.

The Korean government is considering lowering traffic and oil import taxes. It also asked oil-refining companies, such as SK Corporation, to minimize price increases.

When the annual average price of Dubai oil reaches $35 a barrel, Korea’s GDP this year is likely to fall 3.67 percent more than expected, and consumer prices rise 1.53 percentage points, the Korea Energy Economics Institute (KEEI) said.

Kwon-Heui Hong Ki-Jeong Ko konihong@donga.com koh@donga.com