For U.S. Now, $80 Oil May Be Tough to Bear
With pit traders screaming, "Go, go, go" -- and economists sounding alarms -- the world oil benchmark price briefly topped $80 a barrel yesterday for the first time.</br></br>Last year, when crude was at similar levels, prices retreated and the economy stayed resilient. But this year, there are some significant differences, triggering concerns that prices could be headed higher and that the economy could be vulnerable.</br></br>One main distinction: This time around, the economy isn't looking quite as healthy amid concerns about the weakened housing market and mortgage defaults.</br></br>In addition, in 2006, oil inventories were higher because of market incentives to store oil, which meant energy buyers had a stockpile. By contrast, today, different market incentives have led to much lower oil inventories in key regions.</br></br>That's troublesome, because the lack of a stockpile cushion means that any supply crunch could lead buyers -- oil refiners and speculators alike -- to quickly bid up crude-oil prices beyond $80 a barrel, just as the economy appears vulnerable to recession.