NEW YORK – Oil prices dropped on Friday after Egypt's President Hosni Mubarak handed over power to the military and left Cairo.
Benchmark crude for March delivery fell $1.21 to $85.52 in midday trading on the New York Mercantile Exchange. Traders and investors have been concerned that anti-government protests in Egypt over the past 18 days could spread to other parts of the Middle East and disrupt oil supplies. Now that Mubarak has stepped down, the military says it will oversee a democratic transition to a new government.
Closer to home, U.S gasoline prices are the highest ever for this time of year. Since Jan. 1, pump prices have averaged well above $3 per gallon. They hit $3.127 per gallon Friday, 3.4 cents higher than the same time last month and 49.1 cents more than a year ago, according to auto club AAA, Wright Express and Oil Price Information Service.
The dramatic jump brings back memories of three years ago, when pump prices rose above $4 a gallon, forcing many drivers to join car pools and trade in gas-guzzling SUVs for more fuel-efficient cars. But "it would be a mistake to think we're going to have that all over again," OPIS chief oil analyst Tom Kloza said.
Gasoline prices have climbed this year for a number of reasons; including a rise in oil demand from China, a frigid winter and tensions in Egypt, Kloza said. Crude demand will slide in the U.S. by May, as U.S. refineries slow down fuel production to purge stocks of winter fuels as they switch to summer blends, he said.
Kloza said the biggest difference between now and 2008 is that oil traders are much more cautious. After rising above $147 per barrel three years ago, oil prices tumbled to below $33 per barrel in 2009. The market remembers that, he said, and even the most bullish traders no longer think they can chase commodity prices ever higher without any risk.
In other Nymex trading for March contracts, heating oil fell 2 cents to $2.6950 per gallon and gasoline lost a penny at $2.4610 per gallon. Natural gas fell 6 cents to $3.930 per 1,000 cubic feet.
In London, Brent crude fell 31 cents at $101.13 on the ICE Futures Exchange.